Structural change in the Australian electricity industry during the 1990s and the effect on household income distribution: A macro-micro approach

- We model reform-driven structural change in the Australian electricity industry.
- We estimate the distributional effects of structural change by region and decile.
- Structural change led to substantial increases in productivity and real income.
- Structural change led to a small increase in income inequality.
- Infrastructure industry reform can generate large benefits and small costs.

The Australian electricity industry experienced significant structural change during the 1990s mainly as a result of microeconomic reform. We analyse the effects of the structural change on the distribution of household income using a macro-micro approach. Our work shows that, nationwide, all income deciles experience higher real incomes in the order of 2%. Our results show that a previously state-owned monopoly industry can experience significant structural change while generating significant improvements in household real income without leading to significantly adverse impacts on national or regional income inequality. It suggests that policy makers in advanced economies should seriously consider such reforms given that they may generate large economic benefits with rather small economic costs.