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The Distribution of Family Income: Measuring and Explaining Changes in the 1980s for Canada and the United States

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  • McKinley L. Blackburn
  • David E. Bloom

Abstract

This paper attempts to measure and explain recent changes in the distributions of family income in Canada and the U.S. using comparable micro-data for the two countries for 1979 and 1987. Three main sets of conclusions are reached. First, the distributions of total family income (pre-tax, post-transfer) in the two countries changed differently in the 1980s. Average family income increased faster in Canada than in the U.S.. though income inequality increased unambiguously in the U.S., but not in Canada. Imposing a simple structure on the data reveals that the social welfare implications of these changes are generally indeterminate for each country. Second, changes in the distribution of transfer income had important influences on the distribution of total family income in both Canada and the U.S. Transfer income in Canada increased more rapidly than it did in the U.S. during the 1980s and also became more redistributive in nature. Most notably, the shifts in transfer income left female-headed families in Canada with a higher mean income and less income inequality in 1987 than they had in 1970. Among female-headed families in the U.S., income inequality increased while average income declined. Third, increased income inequality in the U.S. partly reflects increased earnings inequality, which is itself associated with a widening of education-earnings differentials that occurred in the 1980s. Earnings inequality also increased in Canada in the 1980s, despite the stability of education-earnings differentials.

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File URL: http://www.nber.org/papers/w3659.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3659.

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Date of creation: Mar 1991
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Publication status: published as Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, edited by David Card and Richard Freeman, pp.233- 266, Chicago: University of Chicago Press, 1993.
Handle: RePEc:nbr:nberwo:3659

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  1. Lillard, Lee & Smith, James P & Welch, Finis, 1986. "What Do We Really Know about Wages? The Importance of Nonreporting and Census Imputation," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 489-506, June.
  2. Harris, Milton & Holstrom, Bengt, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 315-33, July.
  3. Charles M. Beach, 1989. "Review: Dollars and Dreams: A Reduced Middle Class? Alternative Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 162-193.
  4. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
  5. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  6. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July.
  7. Danziger, Sheldon & Taussig, Michael K, 1979. "The Income Unit and the Anatomy of Income Distribution," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 25(4), pages 365-75, December.
  8. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  9. repec:fth:coluec:452 is not listed on IDEAS
  10. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  11. Bourguignon, Francois, 1989. "Family size and social utility : Income distribution dominance criteria," Journal of Econometrics, Elsevier, vol. 42(1), pages 67-80, September.
  12. Murphy, K. & Welch, F., 1990. "Wage Differentials In The 1980s: The Role Of The International Trade," Papers 23, California Los Angeles - Applied Econometrics.
  13. Katz, Lawrence F. & Revenga, Ana L., 1989. "Changes in the structure of wages: The United States vs Japan," Journal of the Japanese and International Economies, Elsevier, vol. 3(4), pages 522-553, December.
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Cited by:
  1. McKinley L. Blackburn & David E. Bloom, 1994. "Changes in the Structure of Family Income Inequality in the United States and Other Industrial Nationa During the 1980s," NBER Working Papers 4754, National Bureau of Economic Research, Inc.
  2. Thomas, Saji & Senauer, Benjamin, 1993. "The Distribution Of Full Income Versus Money Income In The United States," Staff Papers 13986, University of Minnesota, Department of Applied Economics.
  3. Sharpe, Andrew & Zyblock, Myles, 1997. "Macroeconomic performance and income distribution in Canada," The North American Journal of Economics and Finance, Elsevier, vol. 8(2), pages 167-199.

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