NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Public Policies in Canada and the United States

October 27 and 28, 2016
Philip Oreopoulos of Toronto University and David Card of University of California, Berkeley, Organizers

Session 1: Social Safety Net

Hilary W. Hoynes, University of California at Berkeley and NBER, and Mark Stabile, INSEAD and NBER

Small Differences that Matter: Differences in the Social Safety Net and the Implications for Women and Children

The past 15 years has been a period of active policy reform in the cash and near-cash social safety nets of both the United States and Canada. Perhaps more than any other area of social policy, programs in both countries aimed at low-income families and children have evolved from their pre-1992 form. This paper examines this evolution across the two countries, both reviewing the existing evidence and providing additional analysis on how the programs have fared in achieving a broad set of goals. Hoynes and Stabile focus on the two largest programs over this period: the U.S. EITC and the Canadian NCB/CCTB. The evolution of these programs in both countries represents a significant move away from what preceded them and the programs in the two countries now share many similarities. However, the researchers also note "small differences" across these programs that may matter, the largest of which is the work requirements across the two countries. In light of these changes, the researchers examine trends in employment, poverty and family structure of the most affected families, across the two countries. The researchers also review the existing evaluations of these policies and find that the programs in both countries have had significant benefits for children, increased employment for single mothers, and are associated with declines in poverty.


Kevin S. Milligan, University of British Columbia and NBER, and Tammy Schirle, Wilfrid Laurier University

Push and Pull: Disability Insurance, Regional Labor Markets, and Benefit Generosity in Canada and the United

Disability insurance take-up has expanded substantially in the past twenty years in the United States while shrinking in Canada. Milligan and Schirle empirically assess these trends by measuring the strength of the 'push' from weak labor markets versus the 'pull' of more generous benefits. Using an instrumental variables strategy comparing benefit changes across country, age, and year, the researchers find that both benefits and regional wages matter. Simulations suggest that the upswing in disability insurance take-up in the United States would be reversed, dropping the caseload by one quarter, if benefits and wages had followed the growth path observed in Canada.


Michael Baker, University of Toronto and NBER; Janet Currie, Princeton University and NBER; and Hannes Schwandt, University of Zurich

Inequality in Mortality over the Life Course: A Comparison of the U.S. and Canada


Session 2: Skills Development

Marc Frenette, Statistics Canada; Judith Scott-Clayton, Columbia University and NBER; Philip Oreopoulos; and Carolyn Tsao, Harvard University

Why are Community College Completion Rates So Different between Canada and the United States and Does Lead to Differences in Earnings?


Michael Kottelenberg, Huron University College, and Steven F. Lehrer, Queen's University and NBER

New Evidence on How Skills Influence Human Capital Acquisition and Early Labour Market Return to Human Capital between Canada and the United States

Using the Youth in Transition Survey (YITS-A), Kottelenberg and Lehrer estimate a Roy model with a two dimensional latent factor structure to consider how both cognitive and non-cognitive skills influence endogenous schooling decisions and subsequent labor market outcomes in Canada. Contrasting these estimates with those obtained using U.S. data the researchers observe several similarities including non-cognitive skills playing a similar role in determining income at age 25 as cognitive skills. Further, their findings indicate that it is crucial to account for the dynamics in decision making, since the effect of cognitive skills on adult incomes rises by one increasing the likelihood of obtaining further education in both countries. However there are striking differences when exploring the relationships between genders and across family background. The college graduation rate of Canadian women exceeds that of U.S. women, particularly among those with low cognitive skills. However, the age 25 earnings gradient by either cognitive or non-cognitive skill is much flatter in Canada than the United States. Last, policy simulations indicate a recent emergence of relative inequality in Canada, where high skilled children of less-educated parents now on average earn less at age 25 than children whose cognitive skills are in the bottom decile but have high-educated parents. This evidence appears consistent with both findings on the geographic nature of inequality in the United States and sociological studies which explore whether there is truly equality of opportunity.


Session 3: Labor Market

Kory Kroft, University of Toronto and NBER; Fabian Lange, McGill University; Matthew J. Notowidigdo, Northwestern University and NBER; and Matthew Tudball, University of Toronto

Long Time Out: Unemployment and Joblessness in Canada and the United States

Kroft, Lange, Notowidigdo, and Tudball compare patterns of long-term unemployment and duration dependence between the U.S. and Canada. First, they estimate the incidence of long-term unemployment by demographic group, occupation, industry, region, and reason for unemployment, extending past research in the U.S. to the most recent years available and producing new results for Canada covering the same sample period. Second, the researchers extend the matching model in Kroft et al. [2016], which allows for duration dependence in the exit rate from unemployment and transitions between employment (E), unemployment (U), and non-participation (N), to allow for duration dependence in the exit rate from non-participation. The researchers calibrate the model using restricted-access data from the Canadian Labor Force Survey and a new historical vacancy series based on a proxy variable derived from time series employment trends in "recruiting" industries. The main goals of this analysis are to decompose the sources of differences in the incidence of long-term unemployment between the two countries in recent years, and also to assess the role of duration dependence in non-participation in accounting for trends in long-term unemployment and movements in the Beveridge curve in Canada.


Stephen Jones, McMaster University, and Craig Riddell, University of British Columbia

Unemployment, Marginal Attachment and Labour Force Participation in Canada and the United States

David Albouy, University of Illinois at Urbana-Champaign and NBER; Chandler Lutz, Copenhagen Business School; and Casey Warman, Dalhousie University and NBER

Local Labour Markets in Canada and the United States

This paper examines and compares local labor market in the United States and Canada. Employment varies more in Canada, while wages and skill levels vary less, suggesting weaker agglomeration economies and skill sorting. Majority non-English communities (Francophone and Hispanophone) in each country display distinct wage levels, skills, and inequality. Albouy, Lutz, and Warman also examine patterns in labor market institutions and skill prices. Shifts in labor demand have much weaker effects on employment and wages in Canada, although greater effects on unemployment. The researchers find no conclusive evidence of differential effects of immigration.


Session 4: Immigration

Ana Damas De Matos, HEC Montréal, and Daniel Parent, HEC Montréal

Canada and High Skill Immigration in the U.S.: Way Station or Farm System?

In this paper Damas De Matos and Parent look at the characteristics of immigrants in the United States who report that they were living in Canada five years before (in the Census) or one year before (in the American Community Survey) and compare their labor market outcomes to those of immigrants from the same source countries who migrated directly to the U.S. Although the criteria used in Canada's point system might lead one to think that immigrants in Canada would be more skilled than those in the U.S., there is little evidence of this, as would be predicted from a simple migration model. However, those who then move to the U.S. are, in fact, more highly educated than their counterparts in the U.S. and, as a consequence, have much better outcomes and those better outcomes are not driven by composition effects related to different distributions of source countries. Instead the researchers find that the differences are driven largely, but not exclusively, by composition effects related to educational attainment, full-time work status, and occupations. They also find evidence that labor market experience acquired outside the U.S. is better rewarded in the case of immigrants entering from Canada.


Andrew J. Clarke, University of Melbourne, and Ana Ferrer and Mikal Skuterud, University of Waterloo

A Comparative Analysis of the Labour Market Performance of University-Educated Immigrants in Australia, Canada, and the United States: Does Policy Matter?

Clarke, Ferrer, and Skuterud examine Census and survey data from Australia, Canada, and the United States spanning the 1991-2011 period to provide new evidence on the potential for immigration policy to influence the labor market performance of skilled immigrants. The researchers' estimates for all three countries point to improvements across cohorts of male university-educated immigrants in employment rates and weekly earnings relative to university-educated native-born men entering labor markets at the same time, the timing of which are broadly consistent with immigration policy reforms. Nonetheless, the gains appear relatively modest in comparison to a substantial and persistent performance advantage of U.S. immigrants, which is evident across the earnings distribution and among immigrants from a common origin country. Given that there is increasingly little to distinguish the Australian and U.S. systems of employment-based immigration, the researchers interpret the U.S. advantage as primarily reflecting the relative positive selectivity of U.S. immigrants owing to higher U.S. returns to skill and the relative economic security of Australia's and Canada's social welfare systems.


Session 5: Income Inequality

David A. Green, University of British Columbia; Rene Morissette, Statistics Canada; and Benjamin M. Sand, York University

Geographic Spillovers of Booms: The Effects of Canada's Resource Boom on Canada-US Differences in Wages

Since 2000, the U.S. and Canadian labor markets have evolved very differently. U.S. real average wages have either stagnated or declined while Canadian average wages increased by almost 10% for males and 15% for females. Green, Morissette, and Sand investigate the role of the Canadian resource boom in explaining this difference. They construct a model of wage setting that allows for spillover effects of a resource boom on wages in non-resource intensive locations and formulate an empirical specification based on that model. The core idea in the model is that workers in other places can bargain higher wages in places with strong links to resource areas because the value of their outside options increases during a resource boom. The researchers find that wages do rise in areas with more long distance commuting but not with more permanent out-migration to resource intensive provinces. Overall, the researchers conclude that because of wage spillovers, the resource boom can account for a substantial portion of the differences in wage movements between Canada and the U.S. Thus, long-distance commuting can integrate regions in an economy in a way that spreads the benefits and costs of a boom across the economy.


Audra Bowlus, University of Western Ontario; Haoming Liu, National University of Singapore; and Chris Robinson, University of Western Ontario

Different Paths? Human Capital Prices, Wages and Inequality in Canada and the US

In the last three decades, Canada and the U.S. showed different paths in per capita GDP growth, skill premiums and inequality. Bowlus, Robinson, and Liu estimate human capital prices and quantities using the methods developed in Bowlus and Robinson (2012) to examine their separate roles in these differences. In the U.S. there was faster growth and a much more rapid rise in skill premia and inequality. This was primarily due to different paths for the relative price paid to rent high skilled human capital in the two countries, rather than differences in relative quantities of human capital supplied by the typical high skilled worker. The divergent paths across countries for the two countries are interpreted within the framework of the canonical model.


Marie Connolly and Catherine Haeck, Universitè du Québec à Montréal, and Miles Corak, University of Ottawa

Intergenerational Income Mobility in Canada and the United States

In this paper, Connolly, Corak, and Haeck investigate differences in intergenerational income transmission in Canada and the United States. The researchers develop new estimates for Canada following the methodology in Chetty et al. (2014a), based on newly linked administrative tax data, which add younger cohorts to Statistics Canada's Intergenerational Income Database. The researchers use a subsample of their data to get a sample of children comparable to Chetty et al.'s: born in 1980-1982, and observed in 2011-2012, at age 29-32. The researchers look at these children and their parents' income, and then compute their rank in the American income distribution. Looking at Canada as a whole, they find rank-rank correlations of about 0.2, compared to 0.34 in the U.S. To look at geographical patterns, the researchers compute mobility measures at the level of the Canadian Census divisions. Top regions (largely driven by Alberta and its resource boom in those years) show markedly higher levels of mobility than U.S. communities. The researchers use K-means, a machine learning algorithm, to classify areas into different clusters of mobility. They then look at the correlation between their mobility measures and a host of community-level characteristics in the areas where the children in their analysis grew up, both overall and within cluster.


 
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