The ‘Global Financial Crisis’ is widely acknowledged to be a tail event for neoclassical economics (Stevens, 2008), but it was an expected outcome for a range of non-neoclassical economists from the Austrian and post-Keynesian schools. This article provides a survey of the post-Keynesian approach for readers who are not familiar with this literature. It will briefly cover the history of how post-Keynesian economics came to diverge so much from the neoclassical mainstream, and focus on post-Keynesian macroeconomics today and its alternative indicators of macroeconomic turbulence.

Taking five Anglo-Saxon countries that have relatively similar backgrounds and tax systems – Australia, Canada, New Zealand, the UK and the USA – we see that the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1 per cent is highly correlated across Anglo-Saxon countries, more so than with the share of the next 4 per cent. Controlling for country and year fixed effects, we find that a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group.

Age Pension means-testing buffers retired households against shocks to wealth and may influence decumulation patterns and portfolio allocations. Simulations from a simple model of optimal consumption and allocation strategies for a means-tested retired household indicate that, relative to benchmark, eligible and near-eligible households should optimally decumulate faster, and choose more risky portfolios, especially early in retirement. Empirical modelling of a Household, Income and Labour Dynamics in Australia panel of pensioner households confirms a riskier portfolio allocation by wealthier retired households. Poorer pensioner households decumulate at around 5 per cent p.a. on average; however, better-off households continue to add around 3 per cent p.a. to wealth, even when facing a steeper implicit tax rate on wealth.

A buyer group is a subset of downstream firms that pool their demand for an upstream input to negotiate a better deal with suppliers. This study develops a simple model that shows how a buyer group changes market behaviour, focusing on the impact on downstream firms outside the buyer group. This impact critically depends on whether or not the buyer group and the supplier can write a contract contingent on the market price paid by outsiders. With contingent contracts, the price paid by firms outside the buyer group rises and their profits fall. If such contracts are infeasible, possibly due to legal concerns, the market price is lower after the buyer group forms. These results raise issues for antitrust authorities in Australia, Europe, the USA and elsewhere who evaluate buyer-group agreements. We extend the model to consider the situation where a supplier can commit in advance to the market price. In this situation, the bargaining power of the buyer group becomes relevant with the market price inversely related to this bargaining power. We illustrate our results with a simple example.

In this study, we utilise data from a unique new birth-cohort study to see how the risk preferences of young people are affected by cognitive skills and gender. We find that cognitive ability (measured by the percentile ranking for university entrance at age 18) has no effect on risk preferences measured at age 20. This is in contrast to experimental studies that use IQ measures to proxy cognitive skills. However, we do find that gender matters. While young women are significantly more likely than young men to assess themselves as being prepared to take risks, women choose to invest significantly less when they are confronted with a clearly specified investment decision based on hypothetical lottery winnings. This difference between the impact of gender on risk attitudes and the hypothetical lottery investment suggests that impatience and framing affect young women and men differently.

Age Pension means-testing buffers retired households against shocks to wealth and may influence decumulation patterns and portfolio allocations. Simulations from a simple model of optimal consumption and allocation strategies for a means-tested retired household indicate that, relative to benchmark, eligible and near-eligible households should optimally decumulate faster, and choose more risky portfolios, especially early in retirement. Empirical modelling of a Household, Income and Labour Dynamics in Australia panel of pensioner households confirms a riskier portfolio allocation by wealthier retired households. Poorer pensioner households decumulate at around 5 per cent p.a. on average; however, better-off households continue to add around 3 per cent p.a. to wealth, even when facing a steeper implicit tax rate on wealth.

The observed wealth differential in favour of native households seems to contradict the analytical presumption of a saving differential in favour of immigrant households. This article seeks to explain the observed differences in wealth through an examination of the respective saving behaviour of immigrants and natives. Quantile regression and semiparametric decomposition methods are used to identify the saving differential and to isolate the factors that contribute to it. The basic finding is that household income is the key to the differential saving pattern. Moreover, decomposition analysis suggests that immigrants have a tendency to save more than natives when compared with Australian-born households with similar characteristics. We also find evidence of heterogeneity in immigrant saving behaviour depending on household types and countries of origin.

Recent observations suggest that as performance-related pay has been increasingly used, (i) compensation has grown with labour productivity, and (ii) there has been a rise in income inequality. This study is a theoretical attempt to provide a convincing explanation of these observations. We develop an endogenous growth framework comprising a profit/revenue-sharing scheme that simultaneously governs income inequality and economic growth. Therefore, we show that a share-based scheme can cause the workers to engage in performance pay seeking and, as a result, boost economic growth. Nonetheless, the intensive use of performance pay also results in higher income inequality. Because of the increased use of performance pay, there exists a positive relationship between economic growth and income inequality. While this result contradicts the traditional notion, it is supported by recent empirical studies. Our welfare analysis indicates that a more intensive sharing scheme does not necessarily raise the level of social welfare, even though it is favourable to economic growth.

Rising top income shares in developed countries have recently generated a great deal of political and economic discussion. While many theories have been proposed to explain this increase, there has been little robust econometric testing of those explanations. Using a variety of data sources, this study will employ panel co-integration methods, including the FMOLS and PDOLS estimators, to understand the long-run relationship between the top 1 per cent income share and a number of explanatory variables. Our analysis finds that economic openness, the size and ideology of government, the development of financial markets, top marginal tax rates, technological progress and the strength of unions are all important determinants of top income shares. These results offer a comprehensive explanation of why top income shares have been rising in a number of developed economies in the last three decades. The implications of the findings for economic and social policy are also discussed.

This study explores the stability of the stationary state for a dynamic growth model with wealth and human capital accumulation. Knowledge is created through research and learning-by-doing, while the time allocation between labour and leisure is endogenised. We analyse the model in both its deterministic and stochastic versions. First, we describe the deterministic model and analyse the stationary state. Second, using the stationary state, we define the stochastic perturbation and study the squared mean values of the system states for the linearised model. Third, we prove that for certain parameters, the stationary state in the deterministic model is asymptotically stable. Similarly, we also prove that the squared mean values of the variables in the linearised stochastic model are asymptotically stable. Finally, we perform the comparative dynamic analysis for the propensities to save and to enjoy leisure, the tax rates used to finance research and the knowledge utilisation efficiency.

The Economic Record, one of the world's oldest economic journals, has a distinguished history. The flagship journal of the Economic Society of Australia and New Zealand was launched in 1925 and is approaching its 100th birthday. We undertake a forensic examination of the journal over the last 50 years, exploring issues like its content, most-cited articles and most frequent contributors. This article discusses the journal's internationalisation but also identifies how Australia's top economists have, for the most part, faithfully persisted with it. The changing nature of academic publishing is explored through the patterns of collaboration, citations and dry holes.