A Recursive Income Model for Canadians : The Direct and Indirect Effects of Family Background (Working Paper 28)

This paper presents the results of a multi-equation income model which has been estimated for Canadian men and women which incorporates the effects of a number of important family background variables, including mother’s and father’s education, parents’ immigration status, their age at immigration, place of birth, language development, and learning background. Not only education, but also the individual’s tested literacy and numeracy levels are treated as intermediate outcomes which are affected by background and which, in turn, affect income. Many of the background variables are found to have important indirect effects on income which would be missed by more conventional approaches. We also find some interesting gender aspects with respect to the influences of parents’ educations on their children’s outcomes. Various policy implications of the findings are discussed.

Family Background and Access to Post-Secondary Education: What Happened in the 1990's (Woking Paper 34)

This paper presents new evidence on the relationships between access to post-secondary education and family background. More specifically, we use the School Leavers Survey (SLS) and the Youth in Transition Survey (YITS)to analyze participation rates first in 1991, and then almost a decade later in 2000. Overall, post-secondary education participation rates rose over this period. However, participation is strongly related to parent’s education, and whereas participation increased for individuals with more highly educated parents (especially those who went to university), they increased rather less, or in some cases (especially for males) declined for those from lower parental education families. The already strong “effect” of parents’ education on post-secondary access became even greater in the 1990’s. Participation rates are also strongly related to family type, but whereas those from two parent families continue to have an advantage over single mother families, the gap generally shrunk in the 1990’s, especially where the mother had university level schooling. We also find a number of interesting trends by province.

Essays in dynamic optimal taxation: working experience, unemployment scarring and poverty

This thesis investigates the design of optimal tax systems in dynamic environments. The first essay characterizes the optimal tax system where wages depend on stochastic shocks and work experience. In addition to redistributive and efficiency motives, the taxation of inexperienced workers depends on a second-best requirement that encourages work experience, a social insurance motive and incentive effects. Calibrations using U.S. data yield higher expected optimal marginal income tax rates for experienced workers for most of the inexperienced workers. They confirm that the average marginal income tax rate increases (decreases) with age when shocks and work experience are substitutes (complements). Finally, more variability in experienced workers' earnings prospects leads to increasing tax rates since income taxation acts as a social insurance mechanism. In the second essay, the properties of an optimal tax system are investigated in a dynamic private information economy where labor market frictions create unemployment that destroys workers' human capital. A two-skill type model is considered where wages and employment are endogenous. I find that the optimal tax system distorts the first-period wages of all workers below their efficient levels which leads to more employment. The standard no-distortion-at-the-top result no longer holds due to the combination of private information and the destruction of human capital. I show this result analytically under the Maximin social welfare function and confirm it numerically for a general social welfare function. I also investigate the use of a training program and job creation subsidies. The final essay analyzes the optimal linear tax system when there is a population of individuals whose perceptions of savings are linked to their disposable income and their family background through family cultural transmission. Aside from the standard equity/efficiency trade-off, taxes account for the endogeneity of perceptions through two channels. First, taxing labor decreases income, which decreases the perception of savings through time. Second, taxation on savings corrects for the misperceptions of workers and thus savings and labor decisions. Numerical simulations confirm that behavioral issues push labor income taxes upward to finance saving subsidies. Government transfers to individuals are also decreased to finance those same subsidies.

A Simple Model of Access and Capacity for Post-Secondary Schooling in Canada (Working Paper 40)

This paper develops a simple model of the post-secondary education system in Canada that provides a useful basis for thinking about issues of capacity and access. It uses a supply-demand framework, where demand comes on the part of individuals wanting places in the system, and supply is determined not only by various directives and agreements between educational ministries and institutions (and other factors), but also the money available to universities and colleges through tuition fees. The supply and demand curves are then put together with a stylised tuition-setting rule to describe the “market” of post-secondary schooling. This market determines the number of students in the system, and their characteristics, especially as they relate to “ability” and family background, the latter being especially relevant to access issues. The manner in which various changes in the system – including tuition fees, student financial aid, government support for institutions, and the returns to schooling – are then discussed in terms of how they affect the number of students and their characteristics, or capacity and access.