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Trickling Down or Fizzling Out? Economic Performance, Transfers, Inequality and Low Income

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  • Lin, Zhengxi
  • Zhengxi, Lin
  • Zyblock, Miles

Abstract

The objectives of this paper are to determine the empirical relationships between economic performance, transfers and low income among Canadian families, and to explore whether these relationships have changed over time. Similar recent studies in the US find a weakening in the relationship between economic growth and low income reduction over the past 25 years. Using data from the Survey of Consumer Finances of Statistics Canada, we find that there is a statistically significant negative relationship between economic performance and the incidence of low income among families in Canada for the period from 1973 to 1995. Government transfers are also found to lift families above the low income threshold. These results are robust across different family types and for three different measures of low income. We also find a weakening in the relationship between improved economic performance and low income reduction for most family types between 1973 and 1995, and for all family types after 1980. This weakening is associated with rising pre-transfer income inequality among families. Increasing inequality has also reduced the negative impact of transfers on low income rates.

Suggested Citation

  • Lin, Zhengxi & Zhengxi, Lin & Zyblock, Miles, 1997. "Trickling Down or Fizzling Out? Economic Performance, Transfers, Inequality and Low Income," Analytical Studies Branch Research Paper Series 1997110e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:1997110e
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    File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M1997110&ObjType=46&lang=en&limit=0
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    References listed on IDEAS

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    1. Gottschalk, Peter & Danziger, Sheldon, 1985. "A Framework for Evaluating the Effects of Economic Growth and Transfers on Poverty," American Economic Review, American Economic Association, vol. 75(1), pages 153-161, March.
    2. Garnett Picot & John Myles, 1996. "Social Transfers, Changing Family Structure and Low Income Among Children," Canadian Public Policy, University of Toronto Press, vol. 22(3), pages 244-267, September.
    3. Smolensky, Eugene, et al, 1994. "Growth, Inequality, and Poverty: A Cautionary Note," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(2), pages 217-222, June.
    4. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
    5. W. H. Locke Anderson, 1964. "Trickling Down: The Relationship Between Economic Growth and the Extent of Poverty Among American Families," The Quarterly Journal of Economics, Oxford University Press, vol. 78(4), pages 511-524.
    6. Heisz, Andrew, 1996. "Changes in Job Tenure and Job Stability in Canada," Analytical Studies Branch Research Paper Series 1996095e, Statistics Canada, Analytical Studies Branch.
    7. Rebecca M. Blank & David Card, 1993. "Poverty, Income Distribution, and Growth: Are They Still Connected," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 285-340.
    8. Danziger, Sheldon & Gottschalk, Peter, 1986. "Do Rising Tides Lift All Boats? The Impact of Secular and Cyclical Changes on Poverty," American Economic Review, American Economic Association, vol. 76(2), pages 405-410, May.
    9. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
    10. James Tobin, 1993. "Poverty in Relation to Macroeconomic Trends, Cycles, and Policies," Cowles Foundation Discussion Papers 1030R, Cowles Foundation for Research in Economics, Yale University.
    11. Golam Azam & Alonzo Redmon, 1993. "Revisiting the relationship between growth and poverty," The Review of Black Political Economy, Springer;National Economic Association, vol. 22(1), pages 5-18, September.
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    Cited by:

    1. Morissette, Rene & Myles, John & Picot, Garnett, 2003. "Low-income Intensity During the 1990s: The Role of Economic Growth, Employment Earnings and Social Transfers," Analytical Studies Branch Research Paper Series 2003172e, Statistics Canada, Analytical Studies Branch.
    2. Eric G. Moore & Michael A. Pacey, 2003. "Changing Income Inequality and Immigration in Canada, 1980­1995," Canadian Public Policy, University of Toronto Press, vol. 29(1), pages 33-51, March.
    3. Garnett Picot & René Morissette & John Myles, 2003. "Low-Income Intensity During the 1990s: The Role of Economic Growth, Employment Earnings and Social Transfers," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 15-40, January.

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