Interesting study. No breakdown by immigrants/non-immigrants or visible minority/non-visible minority:
Comparative studies of intergenerational earnings and income mobility largely rank Canada as one of the most mobile countries among advanced economies, such as Denmark, Finland and Norway. The assertion that Canada is a highly mobile society is drawn from intergenerational income elasticity estimates reported in Corak and Heisz (1999). Corak and Heisz used data from the earlier version of the Intergenerational Income Database (IID), which tracked the income of Canadian youth only into their early thirties. Recent theoretical literature, however, suggests that the relationship between childrens’ and parents’ lifetime income may not be accurately estimated when children’s income is not observed from their mid-careers—known as lifecycle bias.
The present study addresses this concern by re-examining the extent of intergenerational earnings and income mobility in Canada using the updated version of the IID, which tracks children well into their mid-forties, when mid-career income is observed. This information is essential for intergenerational analysis, as the literature shows that bias arising from lifecycle variation can be greatly mitigated by comparing fathers’ and offspring’s earnings near their mid-careers. Moreover, this paper also examines whether intergenerational mobility differs across the population. With nearly 250,000 observations, the study can differentiate the degree of intergenerational transmission across the full spectrum of the income distribution.
The empirical analysis in this study is based on Statistics Canada’s IID, which was constructed from various tax records to link together children and their parents. The IID consists of youth aged 16 to 19 in 1982 whose tax records are linked to the tax records of their parents by means of the parents’ and the children’s Social Insurance Numbers and information from Statistics Canada’s T1 Family File. The data provide more than 20 years of income history for both parents (1978 to 1999) and children (1986 to 2008) that allows for comparison of the income of children and parents when they were at the main stage of the lifecycle.
The results from the analysis suggest that Canada is still a mobile society, but not to the same extent as previously thought. The new estimate of the father–son earnings elasticity is about 0.32, which is noticeably higher than the values previously reported in the literature (which have been in the neighbourhood of 0.2): lifecycle bias alone explains about two-thirds of the discrepancy between the early estimates and the new result. The extent of intergenerational persistence tends to be greater when market income (i.e., the sum of earnings, self-employment income and asset income) is measured. This suggests that other mechanisms, such as transmission of jobs or entrepreneurial skills, may also be at work. Interestingly, the analysis also shows that the father–daughter elasticity is much less sensitive to these biases. Moreover, the paper documents a clear pattern of nonlinearity in the intergenerational transmission of earnings and income in Canada. In particular, the path to the top of the distribution appears to be quite challenging for sons born to low-income fathers. On the other hand, these same sons appear to have significant chances of moving into the middle class. Social institutions may help explain the latter findings. Finally, this paper demonstrates that the patterns of nonlinearity can be significantly misread when the lifecycle bias is not adequately addressed, especially over the upper part of the distribution.
Source: Intergenerational Income Transmission: New Evidence from Canada
Multicultural Meanderings 