Michael R. Veall

The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence

This paper uses tax statistics to construct new series on Canadian top income shares from 1920 to 2000 and provides a systematic comparison with the U.S. experience. As in the United States, top income shares in Canada display a Ushaped pattern over the century, with a precipitous drop during World War II, followed by a slower decline until 1970. Since the late 1970s, top income shares have been increasing dramatically and the very top shares are now as high as in the pre-war era. As in the United States, the recent increase in top income shares is the consequence of a surge in top wages and salaries. The Canadian experience since the late 1970s does not appear to be well explained by tax changes, suggesting that the upward trend in Canada derives from the United States, perhaps because many high-income Canadians have an emigration option. This in turn suggests that the recent increase in U.S. personal income top shares is not merely a change in tax reporting behavior. The recent sharp increase in top income shares in Canada is of the same magnitude at the individual and family level and is not due to an increase in income mobility.

Pension plans and employee performance : evidence, analysis, and policy

List of Figures List of Tables Ch. 1: Developments in the Market for Private Pensions Ch. 2: Defined Benefit Plans as Implicit Contracts Ch. 3: Impact of Pensions on Quit Rates Ch. 4: Quits and Retirements in the Federal Government Ch. 5: Pensions and Retirement Patterns Ch. 6: Role of Pensions in Earlier Retirement after 1970 Ch. 7: Toward Explaining the Growth of Defined Contribution Plans Ch. 8: Sorting across Plan Type Ch. 9: Encouraging High Discounters to Quit Ch. 10: Aligning Pay and Productivity: 401k Plans Ch. 11: Reliability as a Hidden Worker Attribute Ch. 12: Tax Considerations and Plan Choice Ch. 13: A Pension Tax Policy for Low Discounters Ch. 14: Incentives, High Discounters, and Social Security Ch. 15: Reforms for the Disability and Medicare Programs Notes Selected References Index

Public pensions as optimal social contracts

Abstract A simple overlapping generations model is modified to allow for an externality experienced by the young from consumption by the elderly. This sets up a game between generations in which one generations strategy may be to save too little and rely on gifts from the young (e.g. public assistance) for retirement income. Social security can therefore be viewed as a Pareto-optimal contract to restore efficient intertemporal allocation. A funded public pension plan corresponds to forced saving but is vulnerable in that the next young generation may stop contributing, rely on its children for retirement assistance and meanwhile reap the consumption externality from the current elderlys social security benefits. This suggests a forced-giving or pay-as-you-go type of compulsory pension plan (such as exists in most nations) which also has the advantage of aiding the initial old generation and therefore generating an immediate consumption externality for the initial young. The approach can also be used to explain other aspects of existing social security.

The effect of marginal tax rates on taxable income: a panel study of the 1988 tax flattening in Canada

Federal tax reform in 1988 flattened the Canadian personal income tax schedule, changing the marginal tax rates for many individuals. Using methods similar to those applied by Auten and Carroll (1999) in the study of the effects of the 1986 U.S. Tax Reform Act, we estimate the responsiveness of income to changes in taxes to be substantially smaller in Canada. However we find evidence of a much higher response in self-employment income, in the labour income of seniors and from those with high incomes.

Top Income Shares in Canada: Recent Trends and Policy Implications

According to Canadian taxfiler data, over the last thirty years there has been a surge in the income shares of the top 1%, top 0.1% and top 0.01% of income recipients, even with longitudinal smoothing by individual using three- or five-year moving averages. Top shares fell in 2008 and 2009, but only by a fraction of the overall surge. Alberta, British Columbia, and Ontario have much more pronounced surges than other provinces. Part of the Canadian surge is likely attributable to U.S. factors, but a comprehensive explanation remains elusive. Even so, I draw implications for policies that might achieve some support from across the political spectrum, including the elimination of tax preferences that favour those with high incomes, the promotion of shareholder democracy and, to maintain Canadas relatively high intergenerational mobility, continued wide accessibility to healthcare and education.

Evaluating Pseudo-R2's for Binary Probit Models

Many applied researchers of limited dependent variable models found it disadvantageous that a widely accepted Pseudo-R2 does not exist for this type of estimation. The paper provides guidance for researchers in choosing a Pseudo-R2 in the binary probit case. The starting point is that R2 is best understood in the ordinary least squares (OLS) case with continuous data, which is chosen as the reference situation. It is considered which Pseudo-R2 is best able to mimic the OLS-R2. The results are surprisingly clear: a measure suggested by McKelvey-Zavoina performs the best under our criterion. However, in the more likely case of low Pseudo-R2s, a normalization of a measure proposed by Aldrich-Nelson which we suggest is almost as good as the McKelvey-Zavoina, and is in general easier to calculate. We also show that if the underlying R2 is predicted using cubic regressions given the Pseudo-R2, all measures perform much better.

Bootstrapping the Probability Distribution of Peak Electricity Demand

Demand For effective capacity planning, an electric utility requires an estimate of the probability distribution of future maximum demand, rather than simply a point prediction of expected peak. This paper proposes a method of obtaining this using the bootstrapping technique of B. Efron_(1979) and this is applied to the peak demand of an actual utility, Ontario Hydro. While the technique is constructed from the standard procedure of forecasting a future variable using regression coefficients and known values for the right-hand side variables, it is modified to allow for uncertainty in these independent variable forecasts as well. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

How Fragile Are Fragile Inferences? A Re-evaluation of the Deterrent Effect of Capital Punishment

Extreme bounds analysis attempts to measure the effects of the uncertainty in the specification of the explanatory variables in a regression model on the estimated coefficients of interest. Standard errors for the stochastic extreme bounds are computed using the bootstrap technique. State-by-state cross section data are used to study the deterrent effect of capital punishment in the United States in 1950. The bootstrap standard errors are sufficiently large for some bounds to suggest caution in the interpretation of the empirical results regarding the fragility of inferences for the deterrent effect of capital punishment. Copyright 1989 by MIT Press.

Bootstrap prediction intervals for single period regression forecasts

Abstract The prediction interval formula for the forecast of a regression-dependent variable conditional upon known future values for the independent variables and normally distributed disturbances is commonly taught and used. This pedagogic note illustrates how badly this standard formula can fail when the disturbances are nonnormal, with the degree of failure increasing rather than decreasing with sample size. A small Monte Carlo experiment emphasizes the point for some asymmetric distributions and some seldom-tried symmetric distributions and shows how poorly the standard formula performs, even in large samples. Bootstrap prediction intervals based on either the percentile principle or the percentile-t principle perform substantially better.

Using Bootstrapped Confidence Intervals for Improved Inferences with Seemingly Unrelated Regression Equations

The usual standard errors for the regression coefficients in a seemingly unrelated regression model have a substantial downward bias. Bootstrapping the standard errors does not seem to improve inferences. In this paper, Monte Carlo evidence is reported which indicates that bootstrapping can result in substantially better inferences when applied to t -ratios rather than to standard errors.