Distribution of Income and Wealth in Ontario : Theory and Evidence

Distribution analysis has advanced remarkably in recent years, and this is a valuable application of its principles to a Canadian context. The book provides an extensive survey of recent literature and a new source of income and wealth distribution data for Ontario, drawn from newly available microdata sets. It also presents an evaluation of the data as a basis for measuring inequality in the distribution of economic and well-being. The empirical results illustrate how incomes vary significantly with age according to labour market attachment and experience, educational attainment and occupation, transfer receipts, and investment benefits. Similarly, strong age effects on net worth account reflect life-cycle patterns in asset holdings and debts typically associated with family investment in housing and financial adjustments for retirement. Differences in family size and composition have a substantial effect on the structure of family economic well-being. The inequality effects of adjusting for accrued capital gains and net worth holdings can also be quite significant. It is found that the distributional effects of CPP net benefits are considerable, although they are not as equalizing as one may have expected because of marked cohort effects. The detailed findings suggest that the life-cycle framework is a very useful one for evaluating the distributional effects of certain government programs, particularly intertemporal ones, and they underline the need for a range of different types of policies to address low income problems. The study urges greater recognition of the inequality of treatment and opportunity among different groups of the population. It also points out that conventional income distribution figures are only very imperfect estimates of the state of inequality in the underlying distribution of economic well-being. Contents 5 Acknowledgments 9 1. Introduction 11 PART ONE: EXPLANATION OF INEQUALITY 17 2. Supply determinants and life-cycle behaviour 17 3. Selected demand-side determinants of the distribution of income 64 4. Distributional aggregation 84 PART TWO: DATA ON DISTRIBUTION OF INCOME AND WEALTH 101 5. On measuring inequality 101 6. Incomes of individuals 118 7. Incomes of family units 156 8. Distribution of family wealth 191 PART THREE: IMPUTATIONS AND ADJUSTMENTS TO THE DISTRIBUTION OF INCOME 235 9. Disposable income, under-reporting, and omitted receipts 235 10. Adjustment for cost of living and size of family 261 11. Adjustment for capital gains 281 12. Adjustment for family wealth holdings 297 13. Toward adjustment for net social security benefits: illustration with the Canada Pension Plan 313 14. Summary and conclusions 336 APPENDICES 347 Bibliography 383 Charles M. Beach, With The Collaboration Of David E. Card And Frank Flatters. Bibliography: P. [373]-389.