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The Prince and the Pauper:

The Prince and the Pauper:. Movement of Children Up and Down the Canadian Income Distribution. Peter Burton and Shelley Phipps Dalhousie University.

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The Prince and the Pauper:

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  1. The Prince and the Pauper: Movement of Children Up and Down the Canadian Income Distribution Peter Burton and Shelley Phipps Dalhousie University

  2. Use Statistics Canada’s National Longitudinal Survey of Children and Youth (NLSCY) to study family income for a cohort of Canadian children between 1994 and 2004 • Children 0 to 7 in 1994; 10 to 17 in 2004 • Longest panel of data yet available in Canada Introduction P. Burton and S. Phipps Dalhousie University

  3. What happens to the level of family income as children grow up? • What happens to income inequality among children? • How much movement up and down the distribution takes place? • What are characteristics associated with being ‘stuck at the bottom’ • What changes are correlated with moving up or down the distribution? Five questions: P. Burton and S. Phipps Dalhousie University

  4. NLSCY representative of Canadian child population • Interviews every 2 years (6 cycles, spanning 10 years) • Use information provided by the ‘person most knowledgeable’ about the child • Select 7,163 children with complete income and family size data Data P. Burton and S. Phipps Dalhousie University

  5. Pre-tax annual income from all sources including government transfers • Adjust for differences in need for families of different size using Luxembourg Income study ‘equivalence scale’ (square root of family size) • Actual income of $80,000 for family of 4 means ‘equivalent income’ of $40,000 Question 1. Trends in Income Levels? P. Burton and S. Phipps Dalhousie University

  6. Mean equivalent family income, in 2004 dollars P. Burton and S. Phipps Dalhousie University

  7. Decile cut points defined using the NLSCY (i.e., families with children) Is income growth the same at all points in the distribution? P. Burton and S. Phipps Dalhousie University

  8. Compute measures of income inequality • Annual income and six-year average income Question 2. Trends in Inequality? P. Burton and S. Phipps Dalhousie University

  9. Measures of Income Inequality P. Burton and S. Phipps Dalhousie University

  10. Theil index allows de-composition of total inequality into ‘within group’ (same child across six cycles) plus ‘between group’ (average income across different children) • De-composition suggests inequality of ‘permanent income’ about 75 percent of total Theil Decomposition P. Burton and S. Phipps Dalhousie University

  11. What percent of children who start in bottom quintile in 1994 are again in bottom quintile in 2004? Question 3. Are the Same Children Always at the Bottom of the Income Distribution? P. Burton and S. Phipps Dalhousie University

  12. 1994 to 2004 Transition Matrix P. Burton and S. Phipps Dalhousie University

  13. Transition Matrix for Children of Immigrants P. Burton and S. Phipps Dalhousie University

  14. What happens during intervening years? • How many children ever exposed to a position of low income? • How many children always (in all six cycles) in a position of low income? ‘Lenses’ P. Burton and S. Phipps Dalhousie University

  15. Link P. Burton and S. Phipps Dalhousie University

  16. P. Burton and S. Phipps Dalhousie University

  17. Estimate probit models of the correlates of ‘always’ being in the bottom quintile • Dependent variable uses full six-cycle history • Explanatory variables are ‘starting point risks’ (1994 values) Question 4. Characteristics of Children ‘Stuck’ at Bottom P. Burton and S. Phipps Dalhousie University

  18. In order of size of association, a child is at greatest risk of ‘always’ being at the bottom of the distribution for his/her cohort if he/she: • Lives in a lone-parent family • Has a parent with no paid work • Lives in the Atlantic region • Has a parent who is non-white Key results from probit regressions for ‘always’ in bottom quintile: P. Burton and S. Phipps Dalhousie University

  19. Simulated Probability of Always Being in the Bottom Quintile P. Burton and S. Phipps Dalhousie University

  20. Estimate fixed effects models for change in percentile position • Explanatory variables are now ‘changes’ (so ethnicity and immigrant status dropped) Question 5. Which changes are associated with movements up or down? P. Burton and S. Phipps Dalhousie University

  21. Use longitudinal data tracking a cohort of Canadian children from 1994 to 2004 (from ages 0 to 7 until ages 10 to 17) • Real growth at all points in income distribution; no trends in inequality as this cohort of children grows up • 75 percent of inequality is attributable to ‘permanent income’ Conclusions P. Burton and S. Phipps Dalhousie University

  22. ‘Stickiness’ of relative income position • Beginnning to end of period • Always in the bottom • High level of ‘ever exposed’ to low income P. Burton and S. Phipps Dalhousie University

  23. Largest starting point ‘risks’: parental marital and employment status, region of residence and ethnicity • Largest movements up/down the distribution: changes in parental marital status and regional moves P. Burton and S. Phipps Dalhousie University

  24. Thanks! P. Burton and S. Phipps Dalhousie University

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