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Incomes

Funded Projects

Is there a conflict between economic growth and environmental sustainability? This project will assemble data that can be used to contribute to an evidence-based analysis of this question. As part of the project, Najjar has produced a data dictionary and user guide for the GHG-NPRI-ASM (Greenhouse Gas-National Pollutant Registry Inventory-Annual Survey of Manufacturing) database, which will be the basis of economic analysis that relates economic growth and the environment.

Related Data Sets
ASM, CBSA Customs

Related Research Themes
Incomes, Industry and Firm Analysis

     An extensive amount of literature has stated that immigrants may exhibit poorer economic performance than native-born citizens. There are three main reasons why this relationship may occur: (1) human capital, such as the education and labour market experiences, may be lower for immigrants, (2) language proficiency tends to be lower among immigrants, and (3) immigrants may have weaker networks or live in areas that consist predominately of one ethnic group, known as enclaves. The purpose of this study is to explore another potential reason why immigrants’ economic performance is lower, specifically, financial literacy. Financial literacy allows agents to make more informed decisions regarding saving, investing, borrowing, etc. Evidence from surveys have documented that there are large variations in financial literacy across demographic characteristics such as gender, education, age, religion, and ethnicity. This project studies whether immigrants in Canada are financially sophisticated by examining whether eligible immigrants take advantage of tax breaks. Higher levels of financial literacy may reflect higher levels of human capital, language proficiency and stronger social networks. Thus, this study will account for, or condition on language, education, and networks (measured by the proximity of businesses or individuals with similar demographics).

Related Data Sets
CEEDD

Related Research Themes
Incomes, International

The goal of the Global Income Dynamics Database Project is to provide a rich set of statistics on individual income dynamics for several countries, which are harmonized to make them comparable. The key difference between this project and others (for example, the World Income and Wealth Database of Piketty-Saez-Zucman, et al.) is the focus on dynamics (which requires longitudinal data rather than repeated cross-sections), and administrative data (which allows more sophisticated analyses with reduced measurement issues). This project will enable Canada to be a participant in this database along with 10 other countries (Brazil, Denmark, France, Germany, Italy, Mexico, Norway, Sweden, UK, and US). Canada is uniquely positioned to participate given the newly formed matched worker-firm panel data.

Related Data Sets
CEEDD

Related Research Themes
Incomes

The process of how the economic status of immigrants’ changes from the time of their arrival onward, and how they integrate into the labour market can determine what factors lead to improved outcomes. Another area of interest is how the career dynamics of immigrants and natives differ. The purpose of this study is to answer the following questions: (1) how do immigrants sort into different firms as they assimilate and how their networks play a role in this process, and (2) how firm-specific pay policies may affect immigrants and natives differently? While previous Canadian studies that have investigated the economic status of immigrants employ census-type data, this study will use longitudinal matched employer and employee data. This data is particularly useful as the same sample is tracked at different points in time. The study will look at changes in the characteristics of the jobs immigrants sort into as they assimilate. Such characteristics include the ratio of natives to immigrants in the firm and the size of the firm. Schmutte (2015) has shown that individuals whose neighbours are employed at high-paying firms are more likely to move to a firm that is higher-paying. It is of interest to see if this is the case for immigrants. This may distinguish if certain groups of immigrants that live in certain places assimilate faster.

Related Data Sets
CEEDD

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Recent studies have indicated that the gains to shareholders from mergers and acquisitions (M&As) are a result of layoffs that occur post-merger. After an M&A, the firm undergoes restructuring. In this process, it is likely that some of the workforce at the combined firm may be laid off. While the wealth effects of shareholders are well documented, those of employees are not, especially in the Canadian context. The purpose of this study is to examine the well-being and wealth effect of workers that are employed at merged firms. Specifically, this study hopes to answer the following: (1) what is the effect on the level of employment after an M&A (2) what are the demographics (ex. age, gender, job skill level, family status) of terminated employees and (3) what are the future employment characteristics of such workers (i.e., type, earnings, sector, and location)?

Additional data set: Record of Employment (ROE)

Related Data Sets
CEEDD

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

We aim to understand how providing access to affordable childcare can affect economic productivity. We know from a wide body of academic literature that child-rearing responsibilities impose a severe penalty on the careers of working women, and governments have occasionally attempted to address this by providing public subsidies for universal childcare access. We study one prominent example of such a subsidy program, in which Quebec introduced a generous universal subsidy in 1997 that limited childcare costs to five dollars per day. The specific implementation of the program allows us to compare working mothers with children who are narrowly eligible versus narrowly ineligible for the new program. By comparing otherwise-similar individuals with differing levels of access to childcare, we can estimate how access to childcare affects the future productivity and career trajectories of the individuals affected. We also study whether this subsidy improved the productivity of firms by comparing Quebec to Canadian provinces that did not introduce any new subsidy programs. Our research will provide future policymakers with a better understanding of the costs and benefits of childcare subsidy programs.

Related Data Sets
LWF, T2-LEAP

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

Starting a business is risky because many businesses fail. Unsuccessful entrepreneurs may lose some of the money they invest, they may lose income by giving up a job in order to start the business, and after their business fails, they may not be able to find as high-paying a job as they had before. How important are these different losses for Canadian entrepreneurs? This project seeks to understand how these different risks discourage people with good ideas from starting businesses. By better understanding these risks, we can create public policy to more effectively encourage people to become entrepreneurs.

Related Data Sets
CEEDD

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

Data Sets

ASMAnnual Survey of Manufacturing

Learn More

ASM-IImport Registry Database

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News

Productivity Partnership Spring 2020 Newsletter

November 3, 2020 | NEWSLETTER

In this newsletter:
New funded projects
Explore CDER datasets
Apply for project funding
Past events
Papers and Presentations
News 

 Read More

Productivity Partnership Winter 2020 Newsletter

March 31, 2020 | NEWSLETTER

In this newsletter:
New funded projects
Explore CDER datasets
Apply for project funding
Past events
News 

 Read More

Productivity Partnership Winter 2019 Newsletter

March 4, 2019 | NEWSLETTER

In this newsletter:
New funded projects
Explore CDER datasets
Apply for project funding
Upcoming events
Past events
Working Papers
News 

 Read More

Productivity Partnership Summer 2018 Newsletter

September 12, 2018 | NEWSLETTER

In this newsletter:
New funded projects
Explore CDER datasets
Apply for project funding
Upcoming events
Past events
Working Papers
News 

 Read More

Productivity Partnership Spring 2018 Newsletter

May 24, 2018 | NEWSLETTER

In this newsletter:
New funded projects
Explore CDER datasets
Apply for project funding
Upcoming events
Past events
Datasets highlight
Papers & Presentations
News 

 Read More

Call for Proposals: Funds to assist with the Economic Research using T2-Longitudinal Employment Analysis Program in the Research Data Centres, Statistics Canada

April 12, 2018 | AWARD

Deadline for submissions of proposals: May 15, 2018

Background:
Statistics Canada is piloting the use of business microdata at its Research Data Centres (RDCs) located in 30 universities across Canada.  As through CDER, researchers will work directly with synthetic business microdata before submitting their programs to Statistics Canada staff to be run on the actual microdata.  The pilot will consider only research proposals using the T2-Longitudinal Employment Analysis Program (T2-LEAP), an enterprise-level database that contains key information on firm entry and exit, demographics, finances, and performance. The T2-LEAP has been used to study: employment and business dynamics, industry turnover, productivity growth, high-growth firms, and firm financing, survival and performance.

Funding
To assist in the use of the T2-LEAP data sets at the RDCs, the Canadian Research Data Centre Network (CRDCN) and the Productivity Partnership are funding at least two research projects of up to $6000 each. These funds are intended to be used for research costs including hiring a student research assistant (any level), travel, conference presentation and attendance, ungating of journal articles, and other knowledge mobilization items*.

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Webinar: Using Longitudinal Employment Analysis Program data for Economic Research in the RDCs

March 22, 2018 | MEDIA

Statistics Canada is piloting the use of business microdata in the Research Data Centres (RDCs). To this end, a synthetic version of T2-Longitudinal Employment Analysis Program (T2-LEAP) will be made available in the RDC for approved projects. T2-LEAP can be used to study employment and business dynamics, industry turnover, productivity growth, high-growth firms, and firm financing, survival and performance. During this webinar, additional information will be provided on the dataset, the pilot, and on working with the T2-LEAP. An audiovideo recording will be made for viewing at later dates.

Instructor: Lydia Couture, Program Manager – Canadian Centre for Data Development and Economic Research (CDER), Economic Analysis Division. Lydia has worked for over a decade in the Canadian federal public service. After her studies in economics at the Université de Montréal, she worked as an economist within the Office of the Chief Economist of Global Affairs Canada (formerly the Department of Foreign Affairs and International Trade). In 2011, she joined the Economic Analysis Division of Statistics Canada, developing micro-business datasets and focusing her research on international trade, offshoring, and firm dynamics.

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Call for Proposals Economic Research using T2-Longitudinal Employment Analysis Program

March 1, 2018 | CALL FOR PAPERS

Proposals should be submitted to CDER by April 30, 2018: Canadian Center for Data Development and Economic Research, statcan.cder-cdre.statcan@canada.ca

In this call for proposals, Statistics Canada is piloting the use of business microdata at its Research Data Centres (RDCs) located in 23 universities across Canada.  As through CDER, researchers will work directly with synthetic business microdata before submitting their programs to Statistics Canada staff to be run on the actual microdata.  The pilot will consider only research proposals using the T2-Longitudinal Employment Analysis Program (T2-LEAP), an enterprise-level database that contains key information on firm entry and exit, demographics, finances, and performance. The T2-LEAP has been used to study: employment and business dynamics, industry turnover, productivity growth, high-growth firms, and firm financing, survival and performance.

 Read More

Productivity Partnership Travel Grants to the CEA!

February 26, 2018 | AWARD

The Productivity Partnership is pleased to provide at least ten travel awards to students (undergraduate, Masters, PhD) to attend its Data School sessions, Sunday morning at the CEA meetings in Montréal in June. 

The award is up to $750 per person and will vary with distance traveled and other circumstances.
 
Please submit your online application by March 26.

Productivity Partnership's Fall newsletter!

December 7, 2017 | NEWSLETTER

In this newsletter:

New funded projects
Explore possibilities with CDER datasets
Have an idea for a project on productivity? Apply for funding!
Dataset Highlight: Canadian Synthetic Business Data
Call for Papers!
News Highlights!
Students activities
Research activities
Past events
Need support to attend a conference?

 Read More

Call for papers: 'Explaining Canada’s Post-2000 Productivity Performance' Conference

November 8, 2017 | CALL FOR PAPERS

The Centre for the Study of Living Standards, in collaboration with the Productivity Partnerships, issued a call for papers for the conference to be held in association with the annual meeting of the Canadian Economics Association, McGill University, Montreal, Quebec June 1-3, 2018.

Details on the motivation for the conference, the issues on which papers are sought, and the submission procedures are found in the call for papers. The deadline for proposals is February 2, 2018.

 Read More

Productivity Partnership Summer 2017 Newsletter

August 31, 2017 | NEWSLETTER

Since our last newsletter, we’ve continued to fund new projects, plan and host events, and grow our digital and social media presence. We’ve also welcomed several new members to the team.

We are pleased to announce that the Productivity Partnership website is live, as are our Twitter and LinkedIn accounts. Connect with us and stay up-to-date with our latest news, event details, and more!

 Read More

Productivity Partnership Winter 2017 Newsletter

February 17, 2017 | NEWSLETTER

The Partnership is a team of experts from the academic, private and public sectors looking for an answer to Canada’s productivity performance using Canadian data from the firm or workplace level.

Over the past few months, we’ve been busy with, among other things, funding projects,planning events and talking with the media.

Over the next six years of the project, we’ll be continuing to in these endeavors and more and will be using various tools such as enewsletters, Twitter, and website (still in development) to communicate and engage.

 Read More

Events

PRODUCTIVITY PARTNERSHIP DATA SCHOOL SESSIONS AT THE CANADIAN ECONOMICS ASSOCIATION 2019

 Sunday, June 2, 2019

 Banff, AB


For the 3rd year in a row, the Productivity Partnership will be hosting two data school sessions during the Canadian Economics Association 2019 Annual Meeting. The sessions will take place on Sunday morning and will consist of information on microdata available at CDER/Statistics Canada and presentations from research projects funded by the Partnership.

More information on speakers will be provided soon.

3rd Annual Workshop of Southern Ontario Macro Economists (AWSOME Vol. 3)

 Friday, April 26, 2019

 McMaster University, Hamilton, ON


Bringing together leading economists from universities across Southern Ontario.

In conjunction with the Department of Economics at McMaster, the Productivity Partnership is sponsoring the third Annual Workshop of Southern Macro Economists (AWSOME). The workshop will bring together leading economists from universities across Southern Ontario to discuss research on the latest developments in the study of macroeconomics. Topics of the workshop include: macro theory, default, quantitative macro, and productivity.

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QICSS International Conference 2018: Immigration's Impact, Immigrants' Outcomes: New Results Using Business and Social Data

 Thursday, October 11, 2018

 Montréal, QC


The international conference " Impact of Immigration, Implications for Immigrants: New Results Using Business and Social Data " will bring together Quebec and Canadian researchers specializing in these new data as well as internationally recognized experts in this field. David Card (University of California) and Richard Alba (City University of New York) are among the guest speakers.

This conference is organized by the Quebec Interuniversity Center for Social Statistics and the Productivity Partnership, in collaboration with the Canadian Research Data Centre Network, the Center for Interuniversity Research and Analysis of Organizations (CIRANO) and HEC Montréal.

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Call for proposals: Survey on Financing and Growth of Small and Medium Enterprises

 Thursday, September 13, 2018

 Online


Statistics Canada is launching a new pilot project with the Survey on Financing and Growth of Small and Medium Enterprises 2014 (SFGSME) linked to administrative data and is now inviting interested researchers to submit a proposal by November 4, 2018 (extended).

Learn More

3rd Workshop on the Applications of Industrial Organization : Estimating Productivity

 Friday, September 7, 2018

 Montréal, QC


The Productivity Partnership in collaboration with the Centre interuniversitaire de recherche en économie quantitative, HEC Montréal, Dean of Arts Development Fund, and the Institute for Research on Public Policy, is please to present the 3rd Workshop on the Applications of Industrial Organization : Estimating Productivity. 

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Seminar: Risk Adjustment and Early Academic Outcomes of Funded Children with Disability

 Tuesday, June 12, 2018

 KTH 334, McMaster University, Hamilton ON


The Productivity Partnership presents John Haikisen-DeNew from The Melbourne Institute, University of Melbourne who will be presenting a talk on 'Risk Adjustment and Early Academic Outcomes of Funded Children with Disability' (with Cain Polidano and Chris Ryan)

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Survey of Innovation and Business Strategy

 Monday, June 4, 2018

 Université de Montréal's Research Data Centre, Montréal QC


Cet atelier vise à favoriser les échanges entre les analystes du Centre canadien d’élaboration de données et de recherche économique (CDRE) qui est dépositaire de l’Enquête sur l’innovation et les stratégies d’entreprise, Industrie Canada qui a initié l’Enquête, et les chercheurs menant des projets à partir de l’Enquête ou souhaitant se familiariser avec son utilisation.

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Productivity Partnership Data Schools sessions at the Canadian Economics Association 2018

 Sunday, June 3, 2018

 Montréal, QC


The Productivity Partnership will again be hosting two data school sessions during the Canadian Economics Association 2018 Annual Meeting. The sessions will take place Sunday morning and will consist of information on microdata available at CDER/Statistics Canada and presentations from research projects funded by the Partnership.

Click 'Learn More' to find the exerpts from the Productivity Partnership-CSLS sessions which will take place on Saturday June 3 and the standalone Productivity Partnership sessions which will take place on Sunday June 4. The full program is on the Canadian Economics Association website.

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2nd Annual Workshop of Southern Ontario Macro Economists (AWSOME Vol. 2).

 Tuesday, May 22, 2018

 McMaster University, Hamilton, ON


Bringing together leading economists from universities across Southern Ontario

The Partnership is sponsoring a session at the second Annual Workshop of Southern Ontario Macro Economists (AWSOME) on productivity, with presentations by Michelle Alexopoulos (University of Toronto) on "Secular Stagnation, Technological Change and Productivity" and Tasso Adamopoulos (York University) on "Geography and Agricultural Productivity: Cross-Country Evidence from Micro Plot-Level Data".

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A New Take on Innovation in Canada: Boosting the Demand Side

 Thursday, May 17, 2018

 National Arts Centre, Ottawa


The Productivity Partnership, in conjuction with the Institute for Research on Public Policy, the Innovation Policy Lab at the Munk School of Global Affairs,and the Chair in the Creation, Development and Commercialization of Innovation presented a symposium looking at how to boost the demand side of innovation. Speakers included people from across academia, government departments and industry.

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Productivity Partnership Mini-symposium on Gender and Productivity

 Thursday, May 3, 2018

 Kenneth Taylor Hall 334, McMaster University


The Productivity Partnership presents two speakers, Valentina Duque (University of Michigan) & Anne Brenoe (University of Copenhagen) who will talk about gender and productivity.

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Using Longitudinal Employment Analysis Program Data for Economic Research in the RDCs

 Wednesday, March 28, 2018

 online or Ottawa, ON


Statistics Canada is piloting the use of business microdata in the Research Data Centres (RDCs).

Learn More

Statistics Canada: Socio-Economic Workshop - Leading-Edge Business Micro Data and Updates on Access

 Monday, February 26, 2018

 Ottawa, ON


The Canadian Centre for Data Development and Economic Research (CDER) will be hosting a socio-economic workshop on novel business micro data and updates on access on February 26th, 2018.

An update on the developments in regards to the type of data available in CDER and a sample of the work recently carried out in CDER using business microdata will also be presented. The topic of matched employer-employee data will also be covered, with presentations on the American and the Canadian experience. Finally, recent and upcoming microdata releases in various fields including globalization, manufacturing, and consumer prices, among others, will be described by Statistics Canada representatives.

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Ottawa Partners Meeting of the Productivity, Firms and Incomes Network

 Tuesday, September 26, 2017

 Bank of Canada Conference Centre, Ottawa, Ontario


In conjunction with two of our partners Innovation, Science and Economic Development Canada and the Bank of Canada, we are organizing a workshop on September 26 at the Bank in Ottawa. This particular workshop is intended to be of interest to some of the government departments, business organizations, unions and employer groups in the Partnership. There will also be discussions of the firm/workplace research goals of government policy departments, the Bank of Canada and others and we are looking for panelists to participate in these sessions.

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Mini-symposium on Schooling

 Thursday, June 8, 2017

 McMaster University, Hamilton, ON


Please join the Partnership for a mini-symposium on schooling. 

 

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CEA 2017: Data Schools

 Sunday, June 4, 2017

 St. Francis Xavier University, Antigonish, Nova Scotia


The Productivity Partnership has organized two data school sessions at the Canadian Economics Association Conference. The two data sessions focus on applications of firm-level data and improving access to economic microdata in Canada.

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CEA 2017: Research from the Productivity Partnership

 Saturday, June 3, 2017

 St. Francis Xavier University, Antigonish, Nova Scotia


Please join the Productivity Partnership and learn more about current research coming from the Partnership.

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Annual Workshop of Southern Ontario Macro Economists (AWSOME)

 Wednesday, May 17, 2017

 McMaster University
Great Hall of the University Club


On May 17th we will have the Annual Workshop of South Ontario Macro Economists (AWSOME) at McMaster University. AWSOME is organized by my colleagues Bettina Brüggemann, Alok Johri, Marc-André Letendre and Pau S. Pujolàs i Fons and is sponsored by the Econ Dept at McMaster and the Partnership to Study Productivity Firms and Incomes.

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Data Day

 Friday, March 24, 2017

 Western University, London, Ontario


Speakers from across Canada present and discuss individual-level data, firm-level data, as well as data access and student opportunities.

Learn More

Papers and Publications

September, 2023

We study the welfare implications of employment protection for older workers, exploiting recent bans on mandatory retirement across Canadian provinces. Using linked employer-employee tax data, we show that the bans cause large and similar reductions in job separation rates and retirement hazards at age 65, with further reductions at higher ages. The effects vary substantially across industries and firms, and around two-fifths of the adjustments occur between ban announcement and implementation dates. We find no evidence that the demand for older workers falls, but the welfare effects are mediated by spillovers on savings behavior, workplace injuries, and spousal retirement timing.

Author(s)

Todd Morris & Benoit Dostie 

Related Data Sets
CEEDD

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

Keywords: employment protection; retirement; welfare; active and passive savings responses; health effects; spousal spillovers

JEL Codes: J26, J78, H55

November, 2020

Using data from the Canadian Employer-Employee Dynamics Database between 2001 and 2015, we examine the impact of firms’ hiring and pay-setting policies on the gender earnings gap in Canada. Consistent with the existing literature and following Card, Cardoso, and Kline (2016), we find that firm-specific premiums explain nearly one quarter of the 26.8% average earnings gap between female and male workers. On average, firms’ hiring practices – due to difference in the relative proportion of women hired at high-wage firms, or sorting – and pay-setting policies – due to differences in pay by gender within similar firms – each explain about one half of this firm effect. The compositional difference between the two channels varies substantially over the life-cycle, by parental and marital status, and across provinces.

Related Data Sets
CEEDD

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

Keywords: Gender wage gap, Firm effects, Marital status, Linked employer-employee data, Pay-setting, Sorting

JEL Codes: J16, J31, J51, J71

May, 2020

     We use longitudinal data from the income tax system to study the impacts of firms’ employment and wage-setting policies on the level and change in immigrant-native wage differences in Canada. We focus on immigrants who arrived in the early 2000s, distinguishing between those with and without a college degree from two broad groups of countries – the U.S., the U.K. and Northern Europe, and the rest of the world. Consistent with a growing literature based on the two-way fixed effects model of Abowd, Kramarz, and Margolis (1999), we find that firm-specific wage premiums explain a significant share of earnings inequality in Canada and contribute to the average earnings gap between immigrants and natives. In the decade after receiving permanent status, earnings of immigrants rise relative to those of natives. Compositional effects due to selective outmigration and changing participation play no role in this gain. About one-sixth is attributable to movements up the job ladder to employers that offer higher pay premiums for all groups, with particularly large gains for immigrants from the “rest of the world” countries.

Author(s)

Benoit Dostie, Jiang Li, David Card, Daniel Parent

Related Data Sets
CEEDD

Related Research Themes
Incomes, International, Labour Markets

May, 2019

June, 2017

Author(s)

Brian Lewis, Chief Economist and Assistant Deputy Minister Office of Economic Policy at Ontario Ministry of Finance

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Keywords: microdata, data access

Presented at CEA 2017: Data Schools

March, 2017

Related Data Sets
ASM, ASM-I, CBSA Customs, CEEDD, CIP, CFA, LEAP, LWF, NALMF, SFSME, SIBS, T2-LEAP, TEC, WES

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Presented at Data Day

Author(s)

Natalie Goodwin, Statistics Canada RDC Analyst, Western University RDC

Related Data Sets
ASM, ASM-I, CBSA Customs, CEEDD, CFA, CIP, LEAP, LWF, NALMF, SFSME, SIBS, T2-LEAP, TEC, WES

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Keywords: RDC

Presented at Data Day

Outline

Accessing business microdata for research purposes at the Canadian Centre for Data Development and Economic Research (CDER) at Statistics Canada

  • CDER basics
  • Data sets available for access to CDER
  • Application process
  • Future directions
  • Other information

Related Data Sets
ASM, ASM-I, CBSA Customs, CEEDD, CFA, CIP, LEAP, LWF, NALMF, SFSME, SIBS, T2-LEAP, TEC, WES

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Keywords: CDER; microdata; data access

Presented at Data Day

January, 2016

This paper contributes to the recent and growing literature on optimal top marginal income tax rates. It computes optimal marginal tax rates for top earners in a Bewley-Aiyagari type economy explicitly accounting for entrepreneurs. Entrepreneurs make up more than one third of the highest-earning one percent in the income distribution despite representing less than ten percent of the population. They are thus disproportionately affected by an increase in the top marginal income tax rate. Since entrepreneurs overall also employ half of the private sector workforce, such policy changes can have important repercussions for aggregate labor demand and productivity. In the model households face an occupational choice between working for the market wage or starting their own business. Borrowing constraints induce entrepreneurs to save in order to grow. Consistent with the data, entrepreneurs significantly influence aggregate productivity, generate 50 percent of total output, and account for 40 percent of taxpayers in the top tax bracket. Nonetheless, the welfare maximizing top marginal tax rate amounts to 82.5 percent, and the revenue maximizing one to 90 percent. A steady state comparison between the benchmark economy featuring the current US tax system and the economy with the welfare maximizing top marginal tax rate illustrates the underlying mechanisms. The substantial increase in taxes leads to a large degree of redistribution, yielding sizable welfare gains for low-income working and entrepreneurial households. The welfare gains decline with income for workers, as middle-income workers are hurt by lower equilibrium wages. These lower wages however benefit medium-sized entrepreneurs and enable them to grow, such that all entrepreneurs except those directly affected by the higher tax experience considerable welfare gains, and the size of the entrepreneurial sector grows.

Author(s)

Bettina Brüggemann is an Assistant Professor at partner McMaster University

Related Research Themes
Incomes, Industry and Firm Analysis, Labour Markets

Keywords: Income tax rate

JEL Codes: H2; L26

May, 2015

Related Data Sets
ASM, ASM-I, CBSA Customs, CEEDD, CFA, CIP, LEAP, LWF, NALMF, SFSME, SIBS, T2-LEAP, TEC, WES

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Keywords: CDER; proposal

JEL Codes: Y9

Author(s)

Kim P. Huynh works at the Bank of Canada

Related Data Sets
ASM, ASM-I, CBSA Customs, CEEDD, CFA, CIP, LEAP, LWF, NALMF, SFSME, SIBS, T2-LEAP, TEC, WES

Related Research Themes
Incomes, Industry and Firm Analysis, International, Labour Markets

Keywords: CDER; proposal; microdata

JEL Codes: Y9

November, 2012