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
Date Written: February 1999
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: Suggested Citation