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Cyclical Changes in Short-Run Earnings Mobility in Canada, 1982-1996

In: The State of Economics in Canada: Festschrift in Honour of David Slater

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  • Charles M. Beach
  • Ross Finnie

Abstract

The paper by Charles M. Beach and Ross Finnie represents the first attempt to quantify short-term or cyclical changes in earnings mobility in Canada. Mobility analysis can be seen as a complement to the analysis of income distribution. For a given degree of earnings inequality, more earnings mobility corresponds to securing greater labour market opportunity. Using longitudinal income-tax-based data, the authors divide the employed population into eight age/sex groups: entry workers (20–24), younger workers (25–34), prime-age workers (35–54), and older workers (55–64) for both sexes; and divide the earnings distribution into lower, middle and upper regions or earnings intervals based on median earnings levels for the distribution as a whole, and calculate the proportion of workers in each group for all years over the 1982–96 period. They also develop transition matrices that show the probability of moving from one earnings interval to another over a one-year period. They find that there have been major cyclical changes in earnings polarization and that these changes have been concentrated in recessions, notably in the 1990–92 downturn. They also find that men in particular experienced a marked decrease in their net probability of upward mobility in the earnings distribution during recessions, as the probability of moving up fell sharply as did the probability of moving down. The results of the paper are particularly relevant for an understanding of how earnings mobility may be affected by the current economic slowdown.

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Bibliographic Info

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This chapter was published in: Patrick Grady & Andrew Sharpe (ed.) The State of Economics in Canada: Festschrift in Honour of David Slater, Centre for the Study of Living Standards, pages 453-484, 2001.

This item is provided by Centre for the Study of Living Standards in its series The State of Economics in Canada: Festschrift in Honour of David Slater with number 18.

Handle: RePEc:sls:secfds:18

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Related research

Keywords: Earnings Mobility; Income Mobility; Mobility; Income; Earnings; Distribution; Income Distribution; Earnings Distribution; Earnings Inequality; Recession; Cyclical;

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References

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  1. Bruce Richard Kennedy, 1989. "Mobility and Instability in Canadian Earnings," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 383-94, May.
  2. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  3. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  4. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  5. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
  6. Moshe Buchinsky & Jennifer Hunt, 1996. "Wage Mobility in the United States," NBER Working Papers 5455, National Bureau of Economic Research, Inc.
  7. Burkhauser, Richard V & Holtz-Eakin, Douglas & Rhody, Stephen E, 1997. "Labor Earnings Mobility and Inequality in the United States and Germany during the Growth Years of the 1980s," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 775-94, November.
  8. Paul Beaudry & David Green, 1997. "Cohort Patterns in Canadian Earnings: Assessing the Role of Skill Premia in Inequality Trends," NBER Working Papers 6132, National Bureau of Economic Research, Inc.
  9. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
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Cited by:
  1. Nisar Ahmad & Rayhaneh Esmaeilzadeh, 2009. "Immigrant-Native Differences in Earnings Mobility Processes: Evidence from Canadian and Danish Data," Economics Working Papers 2009-13, School of Economics and Management, University of Aarhus.
  2. Nisar Ahmad & Rayhaneh Esmaeilzadeh & J?rgen Hansen, 2014. "Immigrant-Native Differences in Earnings Mobility Processes," Review of Economics & Finance, Better Advances Press, Canada, vol. 4, pages 13-32, Feburary.

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