Working Paper: NBER ID: w9607
Authors: Emmanuel Saez; Michael R. Veall
Abstract: This paper presents new homogeneous series on top shares of income from 1920 to 2000 in Canada using personal income tax return data. Top income shares display a U-shaped pattern over the century, with a precipitous drop during World War II, followed by a slower decline until 1970. Since the late 1970s, top income shares have been increasing steadily and the very top shares are now as high as in the pre-war era. As in the United States, the recent increase in top income shares is the consequence of a surge in top wages and salaries. As a result, series on the composition of incomes within the top income groups from 1946 to 2000 show a dramatic increase in the share of wages and salaries. The parallel evolution of top income shares in Canada and the United States, associated with much more modest marginal tax rate cuts in Canada, suggests that the upward trend in top shares in Canada since the late 1970s cannot be explained by tax cuts. Further evidence suggests that the upward trend in Canada derives from the United States, perhaps because many Canadians have an emigration option. A data appendix for this paper is available.
Keywords: No keywords provided
JEL Codes: H2; N3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor income growth (J39) | Increase in top income shares (D33) |
| U.S. economic conditions (N12) | Canadian income distribution trends (D31) |
| Tax cuts (H29) | Increase in top income shares (D33) |
| Emigration option (F22) | Influence on Canadian top incomes (D31) |