Differences in Canadian and US Income Levels, 1961 to 2008

Canada's per capita income is often compared with the United States. These comparisons focus on differences in the levels of income and whether the gap between the two countries is narrowing or widening.Statistics Canada and the US Bureau of Economic Analysis (BEA) each produce a myriad of summary macroeconomic statistics on their respective economies. But using these statistics to compare incomes in Canada and the US is not straightforward.Studies that compare measures of income across countries must first deal with what is meant by income and then what price to use to convert these incomes into a common unit of measure. This paper shows that a sensible metric is income measured in terms of the goods and services that can be acquired by each country's residents. However, the price indices necessary for comparing these incomes (referred to as purchasing power parities, or PPPs for short) need to be calculated, as market exchange rates can be misleading when comparing incomes.This paper describes a new way that PPPs are calculated and presents estimates of income per capita in Canada and the US for the period 1961-2008