Top Incomes in the United States and Canada Over the Twentieth Century

This paper presents top income shares series for the United States and Canada over the 20th century. In both countries, top income shares display a U-shaped pattern over the century, with a precipitous drop during World War II, with no recovery in the following decades. Since the late 1970s, however, top income shares have been increasing dramatically and the very top shares are now almost as high as in the prewar era. The drop in top income shares in the first part of the century is mainly a capital income phenomenon but the recent increase in top income shares is the consequence of a surge in top wages and salaries. The United States reduced significantly marginal tax rates for high incomes over the last 40 years but Canada did not. Therefore, the almost identical upward pattern of top income shares in both countries cannot be solely explained by changes in tax avoidance behavior. Mobility at the top of the income distribution has been very stable in Canada in spite of the surge in annual income concentration. Thus the increase in annual top income shares in Northern America will likely translate into an increase in permanent income concentration of similar magnitude. (JEL: H24, H31, N32) Copyright (c) 2005 The European Economic Association.