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Research Institute for Quantitative Studies in Economics and Population

Abstracts of Research Reports: 2007

  1. Gender Inequality in the Wealth of Older Canadians

    by Margaret Denton and Linda Boos

    Beyond income, wealth is an important measure of economic well-being, because while income captures the current state of inequality, wealth has the potential for examining accumulated and historically structured inequality. This paper documents the extent of gender inequality in wealth for Canadian women and men aged 45 and older. The analysis uses data from the 1999 Canadian Survey of Financial Security, a large nationally representative survey of household wealth in Canada. Wealth is measured by total net worth as measured by total assets minus debt. We test two general hypotheses to account for gender differences in wealth. The differential exposure hypothesis suggest that women report less wealth accumulation because of their reduced access to the material and social conditions of life that foster economic security. The differential vulnerability hypothesis suggests that women report lower levels of wealth because they receive differential returns to material and social conditions of their lives. Support is found for both hypotheses. Much of the gender differences in wealth can be explained by the gendering of work and family roles that restricts women’s ability to build up assets over the life course. But beyond this, there are significant gender interaction effects that indicate that women are further penalized by their returns to participation in family life, their health and where they live. When women do work, net of other factors, they are better able to accumulate wealth than their male counterparts.

  2. Which Canadian Seniors Are Below the Low-Income Measure?

    by Michael R. Veall

    About 6% of seniors in Canada have family incomes below the Low-Income Measure. (The Low-Income Measure is 50% of the median family income, adjusted for family size, and is a commonly used, if arbitrary, operational definition of relative poverty.) This is a low rate by international standards, in sharp contrast to the high rate in Canada about 35 years ago. It is lower than the comparable rates for the general Canadian population or for families with children and more Canadians leave below-LIM status during their retirement years than enter it. Canadian income tax data show that the remaining 6% are disproportionately immigrant, female, currently unmarried and supporting dependent children (possibly grandchildren). Age does not appear to be of great importance.

  3. On the Sensitivity of Aggregate Productivity Growth Rates to Noisy Measurement

    by Frank T. Denton

    Aggregate rates of productivity growth are among the most closely watched indicators of economic performance. They are also among the most difficult to measure accurately. This paper explores the sensitivity of such rates to random measurement error using a simple generic model. The model allows for errors in the input and output components of the productivity ratio, with different variances, and for serial and cross correlation of the errors. The effects of the errors are considered from the point of view of growth rates themselves, changes in growth rates, and comparisons between rates in different countries.

  4. Initial Destination Choices of Skilled-worker Immigrants from South Asia to Canada: Assessment of the Relative Importance of Explanatory Factors

    by Lei Xu and Kao-Lee Liaw

    Using a multinomial logit model, this paper explains the initial destination choices of skilled-worker immigrants from four South Asian countries (India, Pakistan, Bangladesh, and Sri Lanka) who landed in Canada in 1992-2001, based on the micro data of Citizenship and Immigration Canada. We found that their choice pattern, which is characterized by extremely strong concentration in Ontario, was strongly affected by the attractions of (1) co-ethnic communities and (2) long-term income opportunities represented by earned income per capita. The temporal pattern of their choices was subject to the lagged effects of the fluctuations in the spatial pattern of employment opportunities in an economically sensible but relatively mild way. The enhancement of Quebec’s attraction by the Canada/Quebec agreement on immigration dissipated within only a few years.

  5. Problematic Post-Landing Interprovincial Migration of the Immigrants in Canada: From 1980-83 through 1992-95

    by Kao-Lee Liaw and Lei Xu

    Based on the longitudinal Immigration Data Base, this research found that the post-landing interprovincial migration of newly landed immigrants led to a further concentration in Ontario and British Columbia. Underlying this pattern was the fact that each of these two provinces had a relatively strong economy, large immigrant communities, and a major international airport. This further concentration of relocating immigrants is problematic in the sense that it contributed to the weakening of the political powers of the economically weak provinces. With respect to immigration classes, the interprovincial net transfer was much stronger for those in the investor, entrepreneur, and refugee classes than for those in the family and assisted relative classes. The research also suggested that the deconcentration and widespread dispersal in the 1995-2000 interstate migration of the immigrants in the U.S. can not serve as a harbinger for a general reversal in the interprovincial migration of immigrants in Canada.

  6. The Adequacy of Retirement Savings: Subjective Survey Reports by Retired Canadians

    by Sule Alan, Kadir Atalay, and Thomas F. Crossley

    We examine retired Canadians’ subjective survey reports of satisfaction with finances,and with life, relative to the period before retirement.

  7. Ordinary Least Squares Bias and Bias Corrections for iid Samples

    by Lonnie Magee

    The O(n-1) bias and O(n-2) MSE of OLS are derived for iid samples. An approach is suggested for handling nonexistent finite sample moments. Bias corrections based on plug-in, weighting, jackknife and pairs bootstrap methods are equal to Op(n-3/2). Sometimes they are effective at lowering bias and MSE, but not always. In simulations, the bootstrap correction removes more bias than the others, but has a higher MSE. A hypothesis test is given for the presence of this bias. The techniques are applied to survey data on food expenditure, and the estimated bias is small and statistically insignificant.

  8. The Roles of Ethnicity and Language Acculturation in Determining the Interprovincial Migration Propensities in Canada: from the Late 1970s to the Late 1990s

    by Xiaomeng Ma and Kao-Lee Liaw

    The main purpose of this paper is to study the roles of ethnicity and language acculturation in determining the propensities to make interprovincial migration in Canada in 1976-81, 1981-86, and 1996-2001, based on the micro data of the 1981, 1986 and 2001 censuses. Since these propensities are also subject to the strong effects of other explanatory factors, a multivariate analysis using a binomial logit model is conducted. An important methodological contribution of this paper is the clarification of the interpretational mistakes in the previous multivariate analyses of Trovato and Halli (1983 and 1990) that depended on the widely used log linear models.

    Our empirical findings turn out to be substantively more sensible than the earlier findings in the literature. With respect to the less complicated case of non-French minority ethnic groups, the empirical data are found to be mostly supportive of the following two hypotheses. H1: The propensities to make inter-provincial migration are lower for minority ethnic groups than for the mainstream ethnic group. H2: The use of English as home language, which represents an important cultural shift towards the mainstream, increases the inter-provincial migration propensities of minority ethnic groups. The very strong support for these two hypotheses by the Italian ethnic group and the lack of support for H2 by the Jewish ethnic group are highlighted and explained. With respect to the more complicated case of the French ethnic group, our findings are supportive of the following two hypotheses. H3: Among those residing outside Quebec, the propensities to make inter-provincial migration are greater for the French ethnic group than for the mainstream ethnic group. H4: This difference is greater for the French ethnic group that continues to use French as the home language than for the French ethnic group that has shifted the home language to English. It is unfortunate that the support for H4, which could aggravate the spatial polarization of the French and Non-French populations between Quebec and the rest of Canada, became successively stronger towards the late 1990s. Fortunately, this trend was countered by a mild narrowing of the extremely wide gap in the propensities to leave Quebec between the English-speaking British and the French-speaking French.

  9. A Note on Income Distribution and Growth

    by William Scarth

    Many analysts expect the aging population to lead to a reduction in the growth of living standards. Income inequality – a problem that has been accentuated by the payroll tax hikes that were necessary to fund the public pension as the population ages – is becoming an increasing challenge at the same time. As a result, policy-makers need to pursue initiatives that can simultaneously address both our efficiency and our equity objectives. With the challenge of the aging population, it is all the more important that we not rely on fiscal policies that involve a trade-off between growth and equality. This paper identifies a strategy for tax policy that meets these objectives.

  10. Is Foreign-Owned Capital a Bad Thing to Tax?

    by William Scarth

    The aging population has raised at least two concerns about tax policy. First, taxes will need to be increased to cover higher public-pension and medical-care expenses when baby boomers have retired. Second, taxes can be cut in the meantime, as the government realizes the "fiscal dividend" that accompanies its debt reduction program (that has been motivated by the aging population development). This paper uses a simple endogenous growth analysis to examine these issues. It is assumed that sales tax increases are infeasible on political grounds. Two conclusions emerge: the income tax rate levied on domestic residents should be cut during the debt-reduction period, and the tax rate on foreigners whose capital is operating in Canada should be increased later on when the bulk of the baby boomers have retired.

  11. Looking for Private Information in Self-Assessed Health

    by James Banks, Thomas Crossley, and Simo Goshev

    The paper investigates whether self-assessed health status (SAH) contains information about future mortality and morbidity, beyond the information that is contained in standard “observable” characteristics of individuals (including pre-existing diagnosed medical conditions). Using a ten-year span of the Canadian National Population Health Survey, we find that SAH does contain private information for future mortality and morbidity. Moreover, we find some evidence that the extra information in SAH is greater at older ages.

    Many developed countries are experiencing a major shift from defined benefit (DB) to defined contribution (DC) pension arrangements. One consequence of this shift is an effective delay in the age at which workers commit to an annuity. Our results therefore suggest that adverse selection problems in annuity markets could be more severe at older ages, and therefore, that the DB to DC shift may expose workers to greater longevity risk. This is an aspect of the DB to DC shift that has received little attention.

  12. An Evaluation of the Working Income Tax Benefit

    by William Scarth and Lei Tang

    The federal government has implemented an earned income tax credit – what it has called the Working Income Tax Benefit – in the 2007 Budget. Edmund Phelps has argued that the earned income tax credit in the United States should be replaced with an employment subsidy. This paper assesses the importance of Phelps’ concern, and related issues, for Canada. This debate is important for two reasons: the plight of those blocked by the "welfare wall" is dire, and the entire community has an interest in lower structural unemployment in an environment that involves an aging population and an accompanying labour shortage.

  13. Exploring the Effects of Aggregation Error in the Estimation of Consumer Demand Elasticities

    by Frank T. Denton and Dean C. Mountain

    Errors introduced by using aggregate data in estimating a consumer demand model have long been a concern. We study the effects of such errors on elasticity estimates derived from AIDS and QUAIDS models. Based on a survey of published articles, a generic parameterization of the income distribution, and the range of Gini coefficients reported for 28 OECD countries, we generate and analyse a large number of “observations” on the differences between elasticities calculated at the aggregate level and those calculated at the micro level. We suggest a procedure for evaluating the likely range of aggregation error when a model is estimated with aggregate data.

Last updated: Jan 7, 2008.
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