Canadian Journal of Economics-Revue Canadienne D Economique最新文献

We explore portfolio allocation in Great Britain by introducing a latent class modelling approach using household panel data based on a nationally representative sample of the population, namely the Wealth and Assets Survey. The latent class aspect of the model splits households into four groups, from lowest-wealth and least-diversified through to highest-wealth and most-diversified, which serves to unveil a more detailed picture of the determinants of portfolio diversification than existing econometric approaches. A pattern of class heterogeneity is revealed that conventional econometric models are unable to identify because the statistical significance and the direction of the effect of some explanatory variables vary across the groups. For example, the effect of labour income on the number of financial assets held influences the level of diversification for the two middle classes, whereas no effect is found for households with the lowest or the highest levels of diversification. Noticeable differences in the magnitude of the effects of pension wealth and occupation are also revealed across the four classes. Such findings demonstrate the importance of accounting for latent heterogeneity when modelling financial behaviour. Ultimately, treating the population as a single homogeneous group may lead to biased parameter estimates, whereby policy based on such models could be inappropriate or erroneous.

In this paper we study the macroeconomic effects of changes in federal taxes for the Canadian economy for the time period 1961–2014. We document all legislated tax changes and the motivations behind them. We then employ the narrative methodology of Romer and Romer (2010) and Cloyne (2013) to identify exogenous changes in federal taxes. Our main empirical result shows that a tax cut of 1% of GDP leads to an increase in GDP of 2.1% on impact and a peak increase of 2.68% after three quarters of the initial shock. Disaggregated analysis shows that the response of output is driven by consumption and investment. We also find changes in personal income and other (sales and production) taxes to have strong effects on output.

This paper presents evidence on the effect of the introduction of Canadian Tax-Free Savings Accounts (TFSAs) on the savings of families with children. Contributions to TFSAs are not tax-deductible but capital income earned in the account accrues tax-free and withdrawals are not taxed. Using a difference-in-differences instrumental variables research design that exploits the sharp change in a family's cumulative TFSA contribution room that arises when a child turns 18 years old, I find that a $1 increase in family-level TFSA balances lowers taxable financial asset holdings by approximately $0.25 to $0.45 and has no statistically significant effect on holdings in traditional tax-deferred accounts. My results suggest that having an additional adult family member eligible to open a TFSA increases the TFSA contributions and account balances of both adult children and their parents.

This paper examines a statistical model of choice in which individual decisions have no preferential basis or optimizing behaviour. Individual consumption is chosen at random, while respecting a linear budget set. All the properties of classical demand theory, including symmetry and negative (semi)definiteness of the Slutsky matrix, are shown to be generally satisfied by mean (i.e., market) demands. Despite the fact that individuals are “irrational,” mean demands can be rationalized as the outcome of utility-maximizing behaviour, even when demands are interior. The severity and frequency of revealed preference violations are unable to reject economic rationality in irrational individuals.

Food insecurity is prevalent in northern Canada, especially among Indigenous peoples. As one approach to address this issue, the federal government subsidizes the shipping of necessities to remote northern communities, initially through the Food Mail Program and then Nutrition North Canada as of April 2011. We use the Canadian Community Health Survey (2007 to 2016) and a difference-in-differences model to estimate the impact of the policy change on food insecurity, testing for heterogeneity between Indigenous and non-Indigenous families. Our results, which withstand several robustness checks, indicate that the policy change increased the likelihood of overall food insecurity by 8.9 percentage points (77.3% relative to the sample mean) and moderate/severe food insecurity by 7.1 percentage points (89.3% relative to the sample mean). It also increased severe food insecurity among Indigenous families by 7.3 percentage points (more than three times the sample mean). There was, however, variation across regions and subsamples of families with children. Specifically, the policy change was particularly harmful to Indigenous families in the territories and Inuit Nunangat. The detrimental impact was also heightened in the presence of children, especially when considering severe food insecurity among Indigenous families.

Utilizing industry-level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we evaluate how cross-border technology investments respond to economic recessions. We find that FDI embedded with intensive research and development (R&D) drops when the destination market is in a recession and the source market is in a normal state and recovers to the pre-recession levels when both destination and source markets are in recession. However, there is little evidence that recessions affect cross-border investments in other aspects of technology measured by the penetration of robots, intellectual property products and information and communications technology (ICT). The response of R&D-intensive FDI to recessions is particularly pronounced in deep and long recessions, during the propagation stage of recessions and in destination markets with relatively weak institutional protection of intellectual property and rule of law, loose FDI regulation and high financial development. Our findings are limited to advanced markets: there is no evidence that R&D-intensive FDI from or to emerging markets responds to either destination or source market recessions.

We model imperfect governments with public choices that are sequential, myopic and not free of error. We first use this framework to explore governmental incremental budgeting. We argue that a model of bounded rationality is required to capture the empirical reality of incremental budgeting. We then provide a model that integrates bounds errors and systematic errors. We argue that the empirical evidence is that bounds errors and systematic errors are inextricably intertwined—some level of bounded rationality is required for systematic errors to emerge. We use this to explore political information lobbying. A testable hypothesis is that lobbyists will focus efforts on policy-makers of low ability. We show that choosing leaders with high ability, that is Madison's wisdom to discern, is important, especially when policy decisions concern dangerous products (rifles) or dangerous environments (pandemics).

This paper analyzes how firms respond to an Internet of Things technology that reduces significantly the tax authorities' marginal cost of monitoring firm activity. More precisely, we analyze how mandating every restaurant of a single Canadian province to have sales recording modules (SRMs) affects restaurant sales, expenses and profits. We estimate that SRMs increase reported sales by 5.8% to 9.8% on average and that this increase is almost completely offset by an equal increase in expenses, including wages. As a result, the firms' taxable income remains mostly unchanged. Our results suggest that sales tax remittance enforcement at the firm level spills over to other firm stakeholders, such as employees and suppliers. Overall, the one-time cost of the device needed to monitor sales more efficiently is small compared with the recurring benefits for tax authorities.

Using survey and administrative data, we study followers of H&L, a massively popular Chilean pension advisor, establishing that financial literacy is not a panacea for poor retirement decision-making. We detail the dynamics of who followed H&L and why. H&L differentially drew financially sophisticated investors, and exposure to H&L causally increased financial sophistication. Nonetheless, followers earned mean annual returns below all buy-and-hold strategies and were aware of this underperformance. Moreover, performance did not materially affect renewal rates. Most followers renew, citing high returns, loss minimization and trust as reasons for following. We show followers gained information about financial matters that had clear, tangible value, and they acted on this information. We posit that followers attributed this to H&L's skill, thus continuing to follow despite the underperformance.

Multinational corporations increasingly use royalty payments for intellectual property rights to shift profits globally. This not only threatens the tax base of countries worldwide but also affects the nature of tax competition. Against this background, our theoretical analysis suggests a surprising solution to the problem of curbing profit shifting without suffering major outflows of capital: a strictly positive withholding tax on royalty payments is both the Pareto-efficient solution under international coordination and the optimal unilateral response. If internal debt is sufficiently responsive, governments can even implement optimal targeting. Then, the royalty tax closes the profit-shifting channel, while all competition for mobile capital is relegated to internal-debt regulation. Our results question the ban on royalty taxes in double tax treaties and the EU Interest and Royalty Directive.