Conference Paper Statistics Canada Symposium Series 2002
The dynamics of low income in four countries
This project seeks to shed light not only on the degree to which individuals are stuck in the low-income range, but also on those who have sufficient opportunity to move into the upper part of the income distribution. It also seeks to compare patterns of mobility through the income distribution in North America and Europe, shedding light on the impact of different models of integration. Cross-National Equivalent File data from the British Household Panel Survey (BHPS) for the United Kingdom, the German Socio-Economic Panel (GSOEP) for Germany, the Panel Study of Income Dynamics (PSID) for the United States and the Survey of Labour Income Dynamics (SLID) for Canada offer a comparative analysis of the dynamics of household income during the 1990s, paying particular attention to both low- and high-income dynamics. Canadian administrative data drawn from income tax files are also used. These panel datasets range in length from six years (for the SLID) to almost 20 years (for the PSID and the Canadian administrative data). The analysis focuses on developments during the 1990s, but also explores the sensitivity of the results to changes in the length of the period analysed.
The analysis begins by offering a broad descriptive overview of the major characteristics and events (demographic versus labour market) that determine levels and changes in adjusted household incomes. Attention is paid to movements into and out of low- and high- income ranges. A number of definitions are used, incorporating absolute and relative notions of poverty. The sensitivity of the results to the use of various equivalence scales is examined. An overview offers a broad picture of the state of household income in each country and the relative roles of family structure, the labour market and welfare state in determining income mobility. The paper employs discrete time-hazard methods to model the dynamics of entry to and exit from both low and high income.
Both observed and unobserved heterogeneity are controlled for with the intention of highlighting differences in the determinants of the transition rates between the countries. This is done in a way that assesses the importance of the relative roles of family, market and state. Attention is also paid to important institutional changes, most notably the increasing integration of product and labour markets in North America and Europe.