Working Paper: NBER ID: w3659
Authors: McKinley L. Blackburn; David E. Bloom
Abstract: This paper attempts to measure and explain recent changes in the distributions of family income in Canada and the U.S. using comparable micro-data for the two countries for 1979 and 1987. Three main sets of conclusions are reached. First, the distributions of total family income (pre-tax, post-transfer) in the two countries changed differently in the 1980s. Average family income increased faster in Canada than in the U.S.. though income inequality increased unambiguously in the U.S., but not in Canada. Imposing a simple structure on the data reveals that the social welfare implications of these changes are generally indeterminate for each country. Second, changes in the distribution of transfer income had important influences on the distribution of total family income in both Canada and the U.S. Transfer income in Canada increased more rapidly than it did in the U.S. during the 1980s and also became more redistributive in nature. Most notably, the shifts in transfer income left female-headed families in Canada with a higher mean income and less income inequality in 1987 than they had in 1970. Among female-headed families in the U.S., income inequality increased while average income declined. Third, increased income inequality in the U.S. partly reflects increased earnings inequality, which is itself associated with a widening of education-earnings differentials that occurred in the 1980s. Earnings inequality also increased in Canada in the 1980s, despite the stability of education-earnings differentials.
Keywords: Income Distribution; Inequality; Canada; United States
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| National economic policies (E64) | Average family income in Canada (D31) |
| National economic policies (E64) | Average family income in the US (D31) |
| Increased earnings inequality (D31) | Income inequality in the US (D31) |
| Widening education-earnings differentials (I24) | Increased earnings inequality in the US (D31) |
| Changes in transfer income (F16) | Total family income distribution in Canada (D31) |
| Changes in transfer income (F16) | Total family income distribution in the US (D31) |
| Economic conditions (E66) | Income inequality among female-headed families in the US (I24) |
| Economic conditions (E66) | Average income among female-headed families in the US (J12) |