International Income Comparisons and Location Choice: Methodology, Analysis, and Implications
AbstractThis paper contributes to ongoing debates on international income comparisons by deploying a novel methodology for constructing empirical distribution functions for the United States and Canada over the period 1993 - 2000. We also conduct tests for first, second, third order stochastic dominance and of intersection of distributions, to determine which,if either, country might be a preferred destination for migration. Our findings are for that all of the years for which there is comparable data, the Canadian income distribution second order stochastically dominates the US income distribution. We provide an interpretation in terms of expected utility theory, considering the case of log utility, and relate our findings to an argument by Joseph Stiglitz, that in the face of skewness of income distributions a potential migrant should look at the median rather than the mean. It turns out that Stiglitz's intuition is correct, at least in the context of our study.
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Bibliographic InfoPaper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 08-02.
Length: 32 pages
Date of creation: 05 Feb 2008
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Publication status: Published: Carleton Economic Papers
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Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-21 (All new papers)
- NEP-MIG-2008-12-21 (Economics of Human Migration)
- NEP-UPT-2008-12-21 (Utility Models & Prospect Theory)
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