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Taxes, Transfers, and Canadian Income Inequality

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  • Marc Frenette
  • David A. Green
  • Kevin Milligan

Abstract

In this paper, we investigate the relationship between the substantial changes in tax and transfer programs and the movements in after-tax income inequality over the 1980s and 1990s. We show that in the 1980s, tax and transfer programs became more redistributive, offsetting substantial increases in market income inequality. In the 1990s, the tax and transfer system stopped undoing the increases in market income inequality, leading after-tax income inequality to rise. Even so, tax and transfer programs were more redistributive in 2000 than in the 1980s. Much of the changes occurred at the provincial level, with social assistance payments first increasing (in the late 1980s) then decreasing (in the late 1990s) and with surtaxes on high-income earners being first imposed and subsequently removed.

Suggested Citation

  • Marc Frenette & David A. Green & Kevin Milligan, 2009. "Taxes, Transfers, and Canadian Income Inequality," Canadian Public Policy, University of Toronto Press, vol. 35(4), pages 389-411, December.
    • Handle: RePEc:cpp:issued:v:35:y:2009:i:4:p:389-411
    DOI: 10.3138/cpp.35.4.389
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. On trends in inequality in Canada, the United Kingdom and Sweden
      by Stephen Gordon in Worthwhile Canadian Initiative on 2011-09-15 05:19:28

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    Cited by:

    1. Sébastien Breau & Michael Shin & Nick Burkhart, 2018. "Pulling apart: new perspectives on the spatial dimensions of neighbourhood income disparities in Canadian cities," Journal of Geographical Systems, Springer, vol. 20(1), pages 1-25, January.
    2. B. Cecilia Garcia-Medina & Jean-François Wen, 2018. "Income instability and fiscal progression," Canadian Journal of Economics, Canadian Economics Association, vol. 51(2), pages 419-451, May.
    3. W. Craig Riddell, 2022. "The labor market in Canada, 2000–2021," IZA World of Labor, Institute of Labor Economics (IZA), pages 432-432, November.
    4. Kelly Foley & David A. Green & W. Craig Riddell, 2024. "Canadian inequality over the last 40 years: common and contrary variations on universal themes," Fiscal Studies, John Wiley & Sons, vol. 45(2), pages 119-130, June.
    5. A. Abigail Payne & Justin Smith, 2015. "Does income inequality increase charitable giving?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(2), pages 793-818, May.
    6. Audra Bowlus & Émilien Gouin‐Bonenfant & Huju Liu & Lance Lochner & Youngmin Park, 2022. "Four decades of Canadian earnings inequality and dynamics across workers and firms," Quantitative Economics, Econometric Society, vol. 13(4), pages 1447-1491, November.
    7. Bev Dahlby & Kevin Milligan, 2017. "From theory to practice: Canadian economists contributions to public finance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1324-1347, December.
    8. Sébastien Breau & Dieter F. Kogler & Kenyon C. Bolton, 2014. "On the Relationship between Innovation and Wage Inequality: New Evidence from Canadian Cities," Economic Geography, Clark University, vol. 90(4), pages 351-373, October.
    9. Nasir Munir & Sadaf Shahab & Muhammad Tariq Mehmood, 2022. "Financial Risk Management and Transmission Mechanism of Monetary Policy: An Empirical Evidence from Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 75-82.
    10. Kevin Milligan, 2011. "The design of tax policy in Canada: thoughts prompted by Richard Blundell's `Empirical evidence and tax policy design'," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1184-1194, November.
    11. Garcia-Medina Cecilia, 2016. "You, Me and the Mean: a Semiparametric Approach to the Redistributive Effects of Transfer Programs," Working Papers 2016-16, Banco de México.
    12. Kenyon Bolton & Sébastien Breau, 2012. "Growing Unequal? Changes in the Distribution of Earnings across Canadian Cities," Urban Studies, Urban Studies Journal Limited, vol. 49(6), pages 1377-1396, May.
    13. Charles M. Beach, 2016. "Changing income inequality: A distributional paradigm for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1229-1292, November.
    14. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).
    15. W. Craig Riddell, 2018. "The labor market in Canada, 2000–2016," IZA World of Labor, Institute of Labor Economics (IZA), pages 432-432, April.

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