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The Evolution of High Incomes in Canada, 1920-2000

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  • Emmanuel Saez
  • Michael R. Veall

Abstract

This paper presents new homogeneous series on top shares of income from 1920 to 2000 in Canada using personal income tax return data. Top income shares display a U-shaped pattern over the century, with a precipitous drop during World War II, followed by a slower decline until 1970. Since the late 1970s, top income shares have been increasing steadily and the very top shares are now as high as in the pre-war era. As in the United States, the recent increase in top income shares is the consequence of a surge in top wages and salaries. The parallel evolution of top income shares in Canada and the United States, associated with much more modest marginal tax rate cuts in Canada, suggests that the upward trend in top shares in Canada since the late 1970s cannot be explained by tax cuts. Further evidence suggests that the upward trend in Canada derives from the United States, perhaps because many Canadians have an emigration option.

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Bibliographic Info

Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 99.

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Length: 53 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:mcm:sedapp:99

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Keywords: income share;

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References

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  1. Daniel Feenberg & James Poterba, 1993. "Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns," NBER Working Papers 4229, National Bureau of Economic Research, Inc.
  2. Robert Gagné & Jean-François Nadeau & François Vaillancourt, 2000. "Taxpayers' Response to Tax Rate Changes: A Canadian Panel Study," CIRANO Working Papers 2000s-59, CIRANO.
  3. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
  4. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.
  5. Claudia Goldin & Robert A. Margo, 1991. "The Great Compression: The Wage Structure in the United States at Mid- Century," NBER Working Papers 3817, National Bureau of Economic Research, Inc.
  6. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
  7. Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
  8. 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.
  9. Daron Acemoglu, 2000. "Technical Change, Inequality, and the Labor Market," NBER Working Papers 7800, National Bureau of Economic Research, Inc.
  10. Richard Bird & Michael Smart, 2001. "Tax Policy and Tax Research in Canada," The State of Economics in Canada: Festschrift in Honour of David Slater, in: Patrick Grady & Andrew Sharpe (ed.), The State of Economics in Canada: Festschrift in Honour of David Slater, pages 59-78 Centre for the Study of Living Standards.
  11. Simon Kuznets, 1950. "Shares of Upper Income Groups in Income and Savings," NBER Books, National Bureau of Economic Research, Inc, number kuzn50-1, May.
  12. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
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Cited by:
  1. A. B. Atkinson & Andrew Leigh, 2005. "The Distribution of Top Incomes in New Zealand," CEPR Discussion Papers 503, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Heiko Müller & Caren Sureth, 2009. "Income tax statistics analysis: A comparison of microsimulation versus group simulation," International Journal of Microsimulation, Interational Microsimulation Association, vol. 2(1), pages 32-48.
  3. Jess Benhabib & Alberto Bisin, 2006. "The distribution of wealth and redistributive policies," 2006 Meeting Papers 368, Society for Economic Dynamics.
  4. Robert Andersen & M. McIvor, 2013. "GINI Country Report: Growing Inequalities and their Impacts in Canada," GINI Country Reports canada, AIAS, Amsterdam Institute for Advanced Labour Studies.
  5. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, 01.
  6. Andrew Leigh, 2005. "Deriving Long-Run Inequality Series from Tax Data," The Economic Record, The Economic Society of Australia, vol. 81(s1), pages S58-S70, 08.
  7. Osberg, Lars, 2013. "Instability implications of increasing inequality: Evidence from North America," Economic Modelling, Elsevier, vol. 35(C), pages 918-930.
  8. Rolf Aaberge & Anthony B. Atkinson, 2008. "Top Incomes in Norway," Discussion Papers 552, Research Department of Statistics Norway.

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