AN ANALYSIS OF DIFFERENTIAL PROVINCIAL INCOME INEQUALITY TRENDS IN CANADA

We study Canadian national and provincial family income inequality from 1991 to 1997. We use special cases of generalized entropy measures, the Theil measures of inequality, since they are decomposable into between-provinces inequality and within provinces inequality. We draw statistical inferences from our findings by using the bootstrapping technique. We find that Canadian provinces have experienced differential trends in family income inequality over this period, a pattern that is masked when analyzing solely national trends. Changes in between-province family income inequality are found to be insignificant, indicating that the observed rise in overall inequality over this period is due to factors within provinces. Changes in within-province family income inequality are found to be significant. We further analyze two-way decompositions by province and education, and by province and age, to learn about the role of human capital and the life cycle in determining changes in family inequality among and within Canadian provinces.