International Income Comparisons and Location Choice: Methodology, Analysis, and Implications
This paper contributes to ongoing debates on international income comparisons by deploying a novel methodology for constructing empirical distribution functions for the United States and Canada over the period 1993 - 2000. We also conduct tests for first, second, third order stochastic dominance and of intersection of distributions, to determine which,if either, country might be a preferred destination for migration. Our findings are for that all of the years for which there is comparable data, the Canadian income distribution second order stochastically dominates the US income distribution. We provide an interpretation in terms of expected utility theory, considering the case of log utility, and relate our findings to an argument by Joseph Stiglitz, that in the face of skewness of income distributions a potential migrant should look at the median rather than the mean. It turns out that Stiglitz's intuition is correct, at least in the context of our study.
|Keywords||Non-parametrics, Finite Mixtures, Heterogeneous, Income Distribution, Stochastic Dominance, Kolmogorov-, Smirnov type statistic, Bootstrap.|
|JEL||Hypothesis Testing (jel C12), Personal Income, Wealth, and Their Distributions (jel D31), Equity, Justice, Inequality, and Other Normative Criteria and Measurement (jel D63), Criteria for Decision-Making under Risk and Uncertainty (jel D81)|
|Publisher||Department of Economics|
|Series||Carleton Economic Papers (CEP)|
Dehejia, V, & Voia, M.-C. (2008). International Income Comparisons and Location Choice: Methodology, Analysis, and Implications (No. CEP 08-02). Carleton Economic Papers (CEP). Department of Economics.