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A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being

Author

Listed:
  • Edward N. Wolff
  • Ajit Zacharias
  • Thomas Masterson
  • Selcuk Eren
  • Andrew Sharpe
  • Elspeth Hazell

Abstract

We use the Levy Institute Measure of Economic Well-being (LIMEW), the most comprehensive income measure available to date, to compare economic well-being in Canada and the United States in the first decade of the 21st century. This study represents the first international comparison based on LIMEW, which differs from the standard measure of gross money income (MI) in that it includes noncash government transfers, public consumption, income from wealth, and household production, and nets out all personal taxes. We find that, relative to the United States, median equivalent LIMEW was 11 percent lower in Canada in 2000. By 2005, this gap had narrowed to 7 percent, while the difference in median equivalent MI was only 3 percent. Inequality was notably lower in Canada, with a Gini coefficient of 0.285 for equivalent LIMEW in 2005, compared to a US coefficient of 0.376-a gap that primarily reflects the greater importance of income from wealth in the States. However, the difference in Gini coefficients declined between 2000 and 2005. We also find that the elderly were better off relative to the nonelderly in the United States, but that high school graduates did better relative to college graduates in Canada.

Suggested Citation

  • Edward N. Wolff & Ajit Zacharias & Thomas Masterson & Selcuk Eren & Andrew Sharpe & Elspeth Hazell, 2012. "A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being," Economics Working Paper Archive wp_703, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_703
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    References listed on IDEAS

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    1. Timothy Smeeding & Andrea Brandolini, 2007. "Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes," LIS Working papers 458, LIS Cross-National Data Center in Luxembourg.
    2. Andrew Sharpe & Alexander Murray & Benjamin Evans & Elspeth Hazell, 2011. "The Levy Institute Measure of Economic Well-Being: Estimates for Canada, 1999 and 2005," Economics Working Paper Archive wp_680, Levy Economics Institute.
    3. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1946. "National Income and Its Composition, 1919-1938, Volume II," NBER Books, National Bureau of Economic Research, Inc, number kuzn41-3.
    4. Charles M. Beach & Ross Finnie & David Gray, 2010. "Long-Run Inequality And Short-Run Instability Of Men'S And Women'S Earnings In Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(3), pages 572-596, September.
    5. Andrew Sharpe & Alexander Murray & Benjamin Evans & Elspeth Hazell, 2011. "The Levy Institute Measure of Economic Well-Being: Estimates for Canada, 1999 and 2005," CSLS Research Reports 2011-09, Centre for the Study of Living Standards.
    6. Edward N. Wolff & Ajit Zacharias & Thomas Masterson, 2009. "Long-Term Trends in the Levy Institute Measure of Economic Well-Being (LIMEW), United States, 1959-2004," Economics Working Paper Archive wp_556, Levy Economics Institute.
    7. Lars Osberg & Andrew Sharpe, 2010. "The Index of Economic Well-Being," Challenge, Taylor & Francis Journals, vol. 53(4), pages 25-42.
    8. Edward N. Wolff & Ajit Zacharias, 2003. "The Levy Institute Measure of Economic Well-Being," Economics Working Paper Archive wp_372, Levy Economics Institute.
    9. Osberg, Lars & Sharpe, Andrew, 2002. "An Index of Economic Well-Being for Selected OECD Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 291-316, September.
    10. Edward N. Wolff & Ajit Zacharias, 2007. "The Levy Institute Measure of Economic Well-Being United States, 1989-2001," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 443-470, Fall.
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    1. “A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being”
      by maximorossi in NEP-LTV blog on 2012-01-23 00:29:57
    2. “A Comparison of Inequality and Living Standards in Canada and the United States Using an Expanded Measure of Economic Well-Being”
      by maximorossi in NEP-LTV blog on 2012-01-23 00:29:57

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    Cited by:

    1. Dennis Fixler & David S. Johnson, 2014. "Accounting for the Distribution of Income in the U.S. National Accounts," NBER Chapters,in: Measuring Economic Sustainability and Progress, pages 213-244 National Bureau of Economic Research, Inc.
    2. Jurgen Faik & Uwe Fachinger, 2013. "The decomposition of well-being categories: An application to Germany," Working Papers 307, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Well-Being; Living Standards; Inequality; Income; International Comparisons;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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