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Increased Earnings Inequality and Macroeconomic Performance: the case of Canada in the 1980s

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  • Fiona Macphail

Abstract

This paper provides an empirical analysis of the increase in earnings inequality and the relationship to macroeconomic conditions, in Canada, during the 1980s. Regression results presented here indicate that a positive and uniform relationship between the unemployment rate and earnings inequality existed through the period 1981 to 1989. These results contrast with recent findings that the unemployment-inequality relationship weakened in the late 1980s in other liberal economies, such as the US and UK. The main policy implication is that stimulative macroeconomic policy remains a relevant policy instrument in Canada and, more generally, that institutions, such as the degree of unionization, and policies, such as minimum wages, may partially explain differences in the pattern of inequality among countries.

Suggested Citation

  • Fiona Macphail, 1998. "Increased Earnings Inequality and Macroeconomic Performance: the case of Canada in the 1980s," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(3), pages 333-359.
    • Handle: RePEc:taf:irapec:v:12:y:1998:i:3:p:333-359
    DOI: 10.1080/02692179800000012
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    References listed on IDEAS

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    4. Johan Fritzell, 1992. "Income Inequality Trends in the 1980 s: A Five Country Comparison," LIS Working papers 73, LIS Cross-National Data Center in Luxembourg.
    5. Morissette, Rene, 1995. "Why Has Inequality in Weekly Earnings Increased in Canada?," Analytical Studies Branch Research Paper Series 1995080e, Statistics Canada, Analytical Studies Branch.
    6. David Card & Richard B. Freeman, 1993. "Introduction to "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States"," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 1-20, National Bureau of Economic Research, Inc.
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