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Age-Income Dynamics Over The Life Course: Cohort Transition Patterns In Relative Income Based On Canadian Tax Returns

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  • Frank T Denton
  • Byron G Spencer
  • Terry A Yip

Abstract

This paper is concerned with patterns of cohort aging and income progression. We take a new approach to the characterization of relative income, explore the dynamics of age/income progression through the use of state transition matrices, consider alternative cohort definitions, and introduce an artificial cross-section cohort based on the transition matrices. Our applications make use of individual income records from the Statistics Canada Longitudinal Administrative Database. Relative income is defined by how an individual of a given age is positioned in the overall distribution of income in a given year. We derive the proportionate distribution of individuals in each decile group at each representative age, starting at 24, and the transition matrices then show the movements from the distribution at one age to the distribution five years later.

Suggested Citation

  • Frank T Denton & Byron G Spencer & Terry A Yip, 2019. "Age-Income Dynamics Over The Life Course: Cohort Transition Patterns In Relative Income Based On Canadian Tax Returns," Department of Economics Working Papers 2019-02, McMaster University.
    • Handle: RePEc:mcm:deptwp:2019-02
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    More about this item

    Keywords

    age-income dynamics; cohort; relative income; state transition matrices;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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