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Income Instability and Fiscal Progression

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  • Jean-Francois Wen
  • Garcia-Medina Cecilia

Abstract

We construct the ratio of the post-fisc to the pre-fisc transitory component of the variance of family incomes in Canada from 1993 and 2008. The ratio measures how much the tax and transfer system attenuates market income instability. It is shown that the ratio of variances is equivalent theoretically to the concept of residual income progression. The fiscal system became less stabilizing beginning in the late 1990s, especially for families headed by main earners with less than high school education. The trend is attributable to personal income tax reforms and reductions in transfers for lower income families.

Suggested Citation

  • Jean-Francois Wen & Garcia-Medina Cecilia, 2016. "Income Instability and Fiscal Progression," Working Papers 2016-07, Banco de México.
  • Handle: RePEc:bdm:wpaper:2016-07
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    More about this item

    Keywords

    Income Instability; Progressive Taxation; Employment Insurance;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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