Job Market Paper

On the Joint Optimal Design of Taxes and Child Benefits

Author: Darapheak Tin

Progressive income taxes and means-tested child benefits aim to support low-income families but jointly generate high, non-linear effective marginal tax rates (EMTRs), especially for low-income mothers. Using Australian household survey data (HILDA) and a calibrated dynamic general equilibrium overlapping-generations model with heterogeneous households, I examine optimal policy design for Australia. When optimizing the tax system in isolation, the welfare-maximizing reform reduces progressivity, shifting burdens downward. This boosts maternal labor supply and modestly raises welfare, but simultaneously disadvantages low-education parents, thereby undermining the objectives of child benefits. A joint optimal reform that combines lower tax progressivity with a universal lump-sum child benefit (30% of average income) offsets these losses for low-education parents and achieves greater parental welfare overall, though at the expense of non-parents. Read more

Paper Presentations to Date:

  • RSE Macroeconomics Seminar 2024 (Research School of Economics, ANU)
  • Joint Workshop by Australasian Macroeconomics Society (WAMS) and Laboratory for Aggregate Economics and Finance (LAEF)2024 (scheduled)

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Working Papers

The Evolution of the Earnings Distribution in a Sustained Growth Economy: Evidence from Australia

Authors: Darapheak Tin, Chung Tran, and Nabeeh Zakariyya
Status: Ongoing

We study the evolution of the earnings distributions in Australia from 1991 to 2020, a prolonged period of sustained economic growth without recession. Using a 10% sample of Australian taxpayer records, we document key trends in labour earnings inequality, mobility and risk for workers aged 25 to 55. Our findings reveal strong upward earnings mobility for both men and women. Earnings inequality rose modestly until the early 2010s, driven by top earners, but has since declined. The gender gap in earnings inequality has narrowed, and even reversed in recent years, mainly due to a sharp reduction in inequality among women. Early-life disparities also play an increasingly important role in shaping later-life inequality, particularly for younger cohorts. This reversal in inequality trends has emerged over the past decade, coinciding with a slowdown in economic growth. Moreover, although aggregate macroeconomic conditions have been relatively stable, idiosyncratic earnings risk—captured by dispersion, skewness, and kurtosis—remains persistent, with the greatest volatility at the bottom bracket. Women continue to face higher risk and lower mobility than men, despite experiencing stronger average earnings growth over the entire period. Hence, our findings provide new insights into how prolonged economic expansion shapes the dynamics of earnings across different demographic and income groups.

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Authors: Darapheak Tin and Chung Tran
Status: Ongoing

This paper examines efficiency–equity trade-offs in child-related transfer programs with means-testing. We develop a dynamic general equilibrium life-cycle model featuring single and married households, uninsurable income and longevity risks, and endogenous female labor supply and human capital accumulation. Calibrated to Australia, where child benefits are generous but strictly means-tested, our analysis shows that replacing the current system with a universal scheme increases maternal labor supply, output, and ex-ante welfare, and receives majority support. However, this reform raises significant tax burdens that lower single mothers’ net lifetime income and welfare. Read more

Paper Presentations to Date:

  • American Economic Association (AEA) Annual Meeting 2025 (Poster Session) (San Francisco, CA - scheduled)
  • Labour Econometrics Workshop (LEW) 2024 (University of Queensland)
  • Australian Conference of Economists (ACE) 2024 (University of Adelaide)
  • Society for Computational Economics 30th International Conference on Computing in Economics and Finance (CEF) 2024 (Nanyang Technological Institute)
  • 37th PhD Conference in Economics and Business 2023 (University of Melbourne)
  • Western Economics Association International (WEAI) 2023 Conference (University of Melbourne)
  • 21st Society for the Advancement of Economic Theory (SAET) Conference (Research School of Economics, ANU)
  • PhD Workshop 2022 (Research School of Economics, ANU)
  • RSE Macroeconomics Seminar Series 2022 (Research School of Economics, ANU)

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Publications

“Lifecycle Earnings Risk and Insurance: New Evidence from Australia”

Authors: Darapheak Tin and Chung Tran
Published: Economic Record, 2023.

This paper studies the nature of earnings dynamics in Australia, using the Household, Income and Labour Dynamics in Australia (HILDA) Survey 2001–2020. Our results indicate that the distribution of earnings shocks displays negative skewness and excess kurtosis, deviating from the conventional linearity and normality assumptions. Wage changes are strongly associated with earnings changes and account more for the dispersion of earnings shocks; meanwhile, the contribution of hour changes is largely absent in upward movement and relatively small in downward movement of earnings changes. Read more

Paper Presentations to Date:

  • Australian Treasury 2022
  • Tax and Transfer Policy Institute (TTPI) Seminar Series 2022 (Crawford School of Public Policy, ANU)
  • 31st Australian Labour Market Research (ALMR) Workshop 2022 (Research School of Social Sciences, ANU)
  • Workshop of the Australasian Macroeconomics Society (WAMS) 2021 (Virtual)
  • A-Life Conference 2021 (Crawford School of Public Policy, ANU)
  • RSE PhD Workshop 2021 (Virtual, ANU)
  • RSE Macro Seminar series 2020 (Virtual, ANU)

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