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International Income Comparisons and Location Choice: Methodology, Analysis, and Implications

Vivek Dehejia () and Marcel Voia

No 08-02, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: 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. (search for similar items in EconPapers)
JEL-codes: C12 D31 D63 D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mig and nep-upt
Date: 2008-02-05
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Published: Carleton Economic Papers

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