Distributional Effects of Income Transfer Programs and Personal Income Taxes
Date
2013-10-02
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Abstract
This thesis studies various distributional effects of social transfers and taxation for Canada
over the 1993-2008 period using the longitudinal Survey of Labour and Income Dynamics
(SLID). It is comprised of four chapters. Chapter 1 examines how changes in the receipt of
program benefits, due to reforms in government transfer programs, have affected the income
distribution. Chapter 2 examines the relationship between the post- to pre-fiscal ratio of
income instability, and measures of fiscal progressivity and indicators of social insurance.
Chapter 3 studies the inequality-reducing role of the tax/transfer system; and chapter 4
presents estimates of earnings dynamics accounting for education.
In chapter 1 we apply a nonparametric reweighting decomposition method that reflects
changes in the probability of receiving program benefits from 1996 to 2006. This method
identifies the redistributive role played by transfer programs, and where in the distribution
these programs have their greatest effects. We find reforms to Social Assistance (SA) reduced
its redistributive effectiveness, while Child Benefits, Employment Insurance (EI) and Old Age
Security became more redistributive.
Chapters 2 and 3 decompose the variance of income into a long- and a short-term component as in the literature on earnings dynamics, using a five-year rolling window structure.
Chapter 2 examines the relationship of the post- to pre-fiscal ratio of income instability (E-ratio) with a measure of fiscal progressivity, and indicators of social insurance.We find the E-ratio increased substantially after 1998, indicating a turn toward less progressivity, a pattern driven mainly by families with low education earners.
The E-ratio of income long-term inequality (permanent variance) is examined in chapter 3. We find the tax/transfer system reduces the permanent variance for earners with less than High School. The provision of SA is more effective in reducing long-term inequality
than EI. Chapter 4 presents the first estimates of earnings dynamics accounting for education and
using the SLID for Canada. Instability and inequality are the greatest for the less educated, and grew rapidly in the late 1990s. Since 2001, inequality increased among earners with college and university degrees.
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Keywords
Finance, Finance, Labor
Citation
Garcia Medina, B. C. (2013). Distributional Effects of Income Transfer Programs and Personal Income Taxes (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/25728