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

73 Pages Posted: 14 Jul 2000 Last revised: 14 Oct 2010

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: September 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. The large size of our earnings panel allows us to estimate and test richer models of earnings dynamics than could be supported by the relatively small panel surveys used in U.S. research. The Canadian data strongly reject several restrictions commonly imposed in the U.S. literature, and they also suggest that imposing these evidently false restrictions may lead to distorted inferences about earnings dynamics and inequality trends.

Suggested Citation

Baker, Michael and Solon, Gary, Earnings Dynamics and Inequality Among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records (September 1999). NBER Working Paper No. w7370. Available at SSRN: https://ssrn.com/abstract=227578

Michael Baker (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
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416-978-4138 (Phone)
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National Bureau of Economic Research (NBER)

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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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