Earnings Dynamics and Inequality Among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records

Statistics Canada Working Paper No. 130

40 Pages Posted: 7 Jul 1999

See all articles by Michael Baker

Michael Baker

University of Toronto - Department of Economics; National Bureau of Economic Research (NBER)

Gary Solon

University of Arizona; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1999

Abstract

Several recent studies have found that earnings inequality in Canada has grown considerably since the late 1970's. Using an extraordinary data base drawn from longitudinal income tax records, we decompose this growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long-run inequality and an increase in earnings instability. Our large sample size enables us to estimate and test richer models than could be supported by the relatively small panel surveys used in most previous research on earnings dynamics. For example, we are able to incorporate both heterogeneous earnings growth and a random-walk process in the same model, and we find that both are empirically significant.

JEL Classification: J31

Suggested Citation

Baker, Michael and Solon, Gary, Earnings Dynamics and Inequality Among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records (February 1999). Statistics Canada Working Paper No. 130. Available at SSRN: https://ssrn.com/abstract=152915 or http://dx.doi.org/10.2139/ssrn.152915

Michael Baker (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4138 (Phone)
416-978-6713 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gary Solon

University of Arizona ( email )

Department of Economics
Eller College of Management
Tucson, AZ 85719
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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