Article

# The Evolution of Top Incomes in an Egalitarian Society: Sweden, 1903–2004

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## Abstract

This study presents new homogenous series of top income shares in Sweden over the period 1903-2004. We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries. The fall is almost entirely due to a dramatic drop in the top percentile explained mostly by decreases in capital income, while the lower half of the top decile - consisting mainly of wage earners - experiences virtually no change over this period. In the past decades top income shares evolve very differently depending on whether capital gains are included or not. When included, Sweden's experience resembles that in the U.S. and the U.K. with sharp increases in top incomes. Excluding capital gains, Sweden looks more like the continental European countries where top income shares have remained relatively constant. A possible interpretation of our results is that Sweden over the past 20 years has been a country where it is more important to make the right financial investments than to earn a lot to become rich.

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... Focusing on the long-run concentration of top incomes in the Swedish economy from 1903 to 2004, Roine and Waldenström (2008) and Roine and Waldenström (2012) show that a decisive role for inequality estimates is played by the portion of capital incomes given by capital gains. When capital gains are included in the definition of capital income, the top 10% income share increases substantially since the 1990s. ...
... As shown in Roine and Waldenström (2008) and Roine and Waldenström (2012), since the 1990s, a series of tax reforms gradually decreasing the marginal tax rate on capital (relative to taxation of labour incomes) created incentives for capital earners to realize larger shares of their investments. In turn, increased capital gains boosted capital incomes at the top of the distribution. ...
... This happened in parallel to an aggregate reduction of the share of income accruing to labor, as shown in Bengtsson (2014). Roine and Waldenström (2008) and Roine and Waldenström (2012) point out that one of the drivers of increased inequality can be found in capital incomes accruing to top income earners, with capital gains playing a crucial role. All in all, the above evidence points in the direction of higher capital share of income, higher concentration of capital incomes at the very top, and resulting higher Gini coefficient for Sweden, starting from the 1980s. ...
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As far as standard measures of income inequality are concerned, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income composition, meaning the heterogeneity in individuals' factor income shares. We highlight the structural change taking place in all the Nordic countries since the early 1990s, with rising inequality in composition of individual incomes due mostly to a shift in capital incomes towards the top of the distribution.
... Focusing on the long-run concentration of top incomes in the Swedish economy from 1903 to 2004, Roine and Waldenström (2008) and Roine and Waldenström (2012) show that the portion of capital incomes generated by capital gains plays a decisive role in inequality estimates. When capital gains are included in the definition of capital income, the top 10% income share has increased substantially since the 1990s. ...
... Excluding capital gains instead leads to an increase in the share of income going to the top 10% that is more in line with other countries in continental Europe. As shown in Roine and Waldenström (2008) and Roine and Waldenström (2012), since the 1990s, a series of tax reforms that gradually decreased the marginal tax rate on capital (relative to the taxation of labor incomes) created incentives for capital earners to realize larger shares of their investments. In turn, increased capital gains boosted capital incomes at the top of the distribution. ...
Article
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According to standard measures of income inequality, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income composition, meaning the heterogeneity in individuals’ factor income shares. We show that, for all countries, a shift in capital incomes toward the top since the early 1990s causes rising heterogeneity in individuals’ factor income shares. To explain this result, we highlight the role of dual taxation systems. For Denmark in 2009–2013, Finland (1990–2007), and Norway (1991–2005), rising capital shares contributed to changes in personal income inequality, while for Sweden our results lead to disregard the capital share as a determinant of increasing income inequality.
... The inegalitarian turn from 1982 on has wiped out the whole post-World War II income equalization in Sweden (calculated from Roine andWaldenström, 2008 andGustafsson andJansson, 2001 ), but Sweden still remains one of the countries with limited inequality in an increasingly unequal world. However, economic inequality in Sweden is on track for further increase. ...
... The inegalitarian turn from 1982 on has wiped out the whole post-World War II income equalization in Sweden (calculated from Roine andWaldenström, 2008 andGustafsson andJansson, 2001 ), but Sweden still remains one of the countries with limited inequality in an increasingly unequal world. However, economic inequality in Sweden is on track for further increase. ...
... The bulging earnings advantage of middle-class employees vis-à-vis unskilled workers in the late nineteenth century chimes in well with Kocka's (1987, p. 7) depiction of the latter half of the nineteenth century as the era of the bourgeoisie. Moreover, our results also resonate with the mounting evidence showing that income inequality was very high in the late nineteenth and early twentieth century, in Sweden as in other developed countries (Bengtsson, Missiaia, Olsson, & Svensson, 2018;Piketty, 2014;Roine & Waldenström, 2008). In the final section of the paper, we discuss several factors that might have benefitted salaried employees relative to unskilled workers in the late nineteenth century, and place this discussion in the overall debate on historical inequality. ...
... Previous research on Swedish inequality in the late nineteenth and early twentieth century has focused on top income earners, capital gains and wealth. In their seminal study of Swedish income inequality, Roine and Waldenström (2008) found very high levels of inequality in in the early twentieth century. They examine top income earners and attribute most of the ups-and downs in inequality to capital incomes among the upper 1%. ...
Article
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We present the first comprehensive, long run salary information on Swedish middle-class employees before the twentieth century. Our data include, for instance, school teachers, professors, clerks, policemen and janitors in Stockholm and Sweden, ca. 1830–1940. We use the new data to compare the annual earnings of these middle-class employees with the annual earnings of farm workers, unskilled construction workers and manufacturing workers. The results show that the income gap between the middle class and the working class widen drastically from the mid-nineteenth century to a historically high level during the 1880s and 1890s. The differentials then decreased during the first four decades of the twentieth century. The bulging earnings advantage of middle-class employees vis-à-vis unskilled workers chimes with Kocka’s depiction of the latter half of the nineteenth century as the era of the bourgeoisie.
... De acuerdo con Roine & Waldenström (2008), en Suecia, uno de los países con menor concentración de la riqueza y los ingresos, se pudo verificar que los niveles de crecimiento de la concentración en la riqueza y los ingresos en centil más alto desde 1970, cayeron más en Suecia que en los demás países europeos, en razón a mayores incrementos en las tasas marginales de los de mayores ingresos sobre el impuesto de renta y a una política salarial más solidaria. ...
Book
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El título del libro nos invita a reflexiones. Lo primero, el derecho ambiental, como área del conocimiento inter y transdisciplinar, que se nutre de los más diversos epistemes como las ciencias naturales, biológicas, física, química, medicina y geografía, que abordan temas como recursos naturales renovables y no renovables, contaminación atmosférica, efectos de invernadero, seres sintientes y su preservación; de otra parte la expresión por un ambiente sano, que conecta con una filosofía de vida, antropología consciente, economía sostenible, que indagan por el papel del ser humano frente al planeta, los seres vivos e inanimados, la ciudadanía del mundo con derechos y deberes frente a la naturaleza, en perspectiva de lo público, donde los Estados nación en sus planes de desarrollo, presupuestos públicos, programas y políticas dedican esfuerzos a los temas medioambientales, con decisiones desde la hacienda pública, algunas relacionadas con tributos: impuestos, tasas y contribuciones, dirigidos a incentivar prácticas limpias, a conservar y prevenir; otras relacionadas con el régimen sancionatorio, en forma de sanciones administrativas, disciplinares, civiles o pecuniarias, en virtud de los daños o perjuicios medioambientales, compensaciones o precios, para trasladar al contaminante los costes que su acción u omisión demanden, sin descartar un régimen punitivo por delitos ambientales, con reparaciones económicas, bien de carácter civil o administrativo.
... Piketty (2003) devotes space in his study about the role of progressive taxation on the evolving dynamics of top income shares in the case of France. The role of tax progressivity is also analysed by Roine and Waldenström (2008) in the case of Sweden. Saez and Veall (2005) analyse the drop of marginal rates of taxation in the 1960s on Canada. ...
Article
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We analyse top income and wealth shares data, by conducting a robust estimation of trends, tests for structural breaks, and tests for determining persistence. We include Anglo-Saxon countries, continental Europe and Asian countries, grouped under different percentiles and deciles, spanning a period that is at least close to a century. We find that the top income shares for almost all countries are characterised by broken trends, or level shifts. The preponderance of trend breaks appears in the 1970s and 1980s where after a negative trend changes in magnitude or direction. Finally, shocks to the top income share data are not transitory, which have consequences for policy such as advocating redistributive measures.
... Income inequality is analyzed separately for the elderly (age 65 and older) and the working-age population (age 18-64). Because capital income has been a main driver of income inequality in many rich countries (Atkinson and Piketty 2007), including Sweden (Björklund and Jäntti 2011;Roine and Waldenström 2008), Gini coefficients of disposable income are shown before and after capital income. ...
... Income inequality is analyzed separately for the elderly (age 65 and older) and the working-age population (age 18-64). Because capital income has been a main driver of income inequality in many rich countries (Atkinson and Piketty 2007), including Sweden (Björklund and Jäntti 2011;Roine and Waldenström 2008), Gini coefficients of disposable income are shown before and after capital income. ...
Chapter
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The Swedish pension system received substantial international recognition when it was introduced in the mid-1990s. The earnings-related benefits, composed of the nonfinan- cial defined contribution (NDC) pension (inkomstpension) and the financial defined contribution (FDC) pension (premiepension), were left outside of the state budget, and established a direct link between what people pay during their working lives and the pensions they receive in retirement. Consequently, costs should not be passed on to future generations. Nonetheless, the system also included redistributive components intended to raise the incomes of the poorest elderly who were not able to allocate suf- ficient income-related contributions to secure an acceptable pension. These low-income targeted components, which consist of the guaranteed minimum pension (garanti- pension), the housing supplement (bostadstillägg för pensionärer), and social assistance (äldreförsörjningsstöd), were left in the state budget. Whereas the guaranteed minimum pension is tested only against the NDC and FDC schemes, social assistance and the housing supplement are means-tested more broadly vis-à-vis other income, including income from capital (or assets). The new pension system has been in place for roughly two decades, which offers ample opportunity to study its effects on Swedish income distribution. This chapter applies a policy perspective on old-age incomes in Sweden, focusing on both the eco- nomic positions of elderly citizens and the redistributive effects of the pension system. It analyzes poverty trends among the elderly, as well as how income inequalities in old age have developed since introduction of the new pension system. Developments among the elderly are contrasted with those of the working-age population. The empirical anal- yses are based on the most up-to-date micro-level income data provided by Statistics Sweden. The data are from HEK (Hushållens ekonomi), which includes a sample of register data on incomes at the individual and household levels, coupled with survey data about household types and other characteristics of the sampled population. The total sample size varies across years and includes between 9,000 and 19,000 households annually. The sampling frame is at the individual level, to which household-level data from registers are later added.
... Since the seminal contribution of Thomas Piketty (2001,2003), a succession of studies seek to construct top income share series over the twentieth century for countries around the world. 2 These studies use income tax statistics to measure the concentration of income within the uppermost part of the distribution. Since most countries introduced modern income tax systems at the beginning of the twentieth century, 1 These German data provide the empirical support for the inequality increasing part of the Kuznets curve (Kuznets 1955). 2 Among many others, Piketty (2003) estimate the series for France, Atkinson and Salverda (2005) for the Netherlands and the United Kingdom; Aaberge and Atkinson (2010) for Norway; Alvaredo and Saez (2009) for Spain; Roine and Waldenström (2008) for Sweden; and Piketty and Saez (2003) and Saez (2005) for the United States and Canada. Dell (2005) provided the first long-run series for Germany . ...
Article
This study provides new evidence on top income shares in Germany from industrialization to the present. Income concentration was high in the nineteenth century, dropped sharply after WWI and during the hyperinflation years of the 1920s, then increased rapidly throughout the Nazi period beginning in the 1930s. Following the end of WWII, German top income shares returned to 1920s levels. The German pattern stands in contrast to developments in France, the United Kingdom, and the United States, where WWII brought a sizeable and lasting reduction in top income shares. Since the turn of the millennium, income concentration in Germany has been on the rise and is today among the highest in Europe. The capital share is consistently positively associated with income concentration, whereas growth, technological change, trade, unions, and top tax rates are positively associated in some periods and negative in others.
... To illustrate this, consider the black points in Fig. 1, which are the income shares for the United States in 2013 retrieved from the WIID. These points of the Lorenz curve are, in most cases, the 2 A substantial body of research has also focused on national evolutions of top incomes share: see Saez (2005) for the case of the US; Atkinson (2005) and Atkinson and Salverda (2005) for the UK; Piketty (2003) for France; Bach, Corneo, and Steiner (2013) for Germany; Roine and Waldenström (2008) for Sweden; Alvaredo and Londoño (2013) for Colombia; Alvaredo (2009b) for Portugal; Atkinson et al. (2011), Andrews, Jencks, andLeigh (2011), Atkinson and Leigh (2008) for New Zealand. 3 An alternative methodology that avoids defining ex-ante the shape of the distribution consist of estimating a non-parametric kernel distribution (Sala-i Martin, 2006). ...
... Income inequality is analyzed separately for the elderly (age 65 and older) and the working-age population (age 18-64). Because capital income has been a main driver of income inequality in many rich countries (Atkinson and Piketty 2007), including Sweden (Björklund and Jäntti 2011;Roine and Waldenström 2008), Gini coefficients of disposable income are shown before and after capital income. ...
... The last major change dates back to the incorporation of Savoie and Nice's comté in 1860. Subsequently, only Alsace-Moselle départements have escaped temporarily from the French administration between 1870 and 1918 and during the Second World War. 3 For example, the works ofAtkinson (2005) for the United Kingdom,Roine and Waldenström (2008) for Sweden,Atkinson and Salverda (2005) for the Netherlands,Alvaredo and Saez (2009) for Spain or Alvarado (2009) for Portugal can be cited. ...
Thesis
This thesis has a dual purpose. First, it presents the methods used to build two new historical databases relating to departments. The first database provides the departmental lifetables for the period 1901-20-14. The second database provides the departmental distributions of income over the period 1960-2014. Second, this thesis presents the first work resulting from the joint use of these two databases and other statistics: they concern both the dynamics of spatial inequalities and some specific historical events. Thus, the analysis of the spatial distribution of the population since the middle of the 19th century allows to understand the dynamics induced by the rural exodus, but also by the new trends of today's migrations. The analysis of mortality inequalities over the last 200 years shows that inequalities have fallen dramatically since the end of the 19th century, while the geography of excess mortality has changed. Finally, the analysis of spatial income inequalities reveals a continuous decline since the 1920s. This decline occurred only since 1950 spatial inequalities are observed using a synthetic indicator of welfare, combining both mortality inequalities and income inequalities. The thesis ends with the analysis of internal migrations during the Second World War: these migrations were massive, and clearly oriented towards the free zone. These results testify both to the impact of this event on French demography, and to the quest for freedom of the French of that time, little hampered by the demarcation line.
... z. B.Roine, Waldenström, 2008;Atkinson, Leigh, 2010). Gerade in der Steuerpolitik unterscheiden sich die Staaten stark. ...
... Of course, Lindert is not alone in expressing skepticism towards a link between factor shares and income inequality, famous previous examples being Friedman (1962, Chapter 14) and Lydall (1968, p. 7). 2 An exception is Roine and Waldenström (2008), who examined the role of the capital shares for the evolution of top income shares in Sweden over the twentieth century. See, for example, Glyn (2009) or Atkinson (2009) for overviews. ...
Article
This article studies the long-run relationship between the capital share in national income and top personal income shares. Using a newly constructed historical cross-country database on capital shares and top income data, we find evidence on a strong, positive link that has grown stronger over the past century. The connection is stronger in Anglo-Saxon countries, in the very top of the distribution, when top capital incomes predominate, when using distributed top national income shares, and when considering gross of depreciation capital shares. Out of-sample predictions of top shares using capital shares indicates several cases of over- or underestimation.
... Jäntti et al. (2010) concluded that "the main factor that has driven up the top 1% income share in Finland after the mid-1990s is an unprecedented increase in the fraction of capital income". In Sweden, Roine and Waldenström (2008) report that "between 1945 and 1978 the wage share at all levels of top incomes became more important . . . But in 2004 the pattern is back to that of 1945 in terms of the importance of capital, in particular when we include realised capital gains". ...
Article
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Public debates about the rise in top income shares often focus on the growing dispersion in earnings, and the soaring pay for top executives and financial-sector employees. But can the change in the marginal distribution of earnings on its own explain the rise in top income shares? Are top executives replacing capital owners in the group of top-income earners, or are we rather witnessing a fusion of top capital and top earnings? This paper proposes an extension of the copula framework and uses it for exploring the changing composition of top incomes. It illustrates that changes in top income shares can easily be decomposed into respective changes in the marginal distributions of labour and capital income and the changing association between the two types of income. An application using tax record data from Norway shows that the association between top labour and capital incomes grew stronger between 1995 and 2005 in the top half of the wage and capital income distribution, though it declined for the top 1% of capital income receivers. A gender decomposition demonstrates that the association of wage and capital incomes at the top is particularly striking for men, whilst women are largely under-represented in the top halves of the two marginal distributions.
... Scandinavian countries display today the lowest levels of inequality in comparative terms, but whether this was likewise in the long 19th Century remains to be clearly established. Roine and Waldenström showed that top income concentration in Sweden was similarly high at the onset of the 20th Century as in other Western countries; although it decreased intensely thereafter [126]. The literature has, in any case, remarked the importance of the structure of land property, with small freeholders in Scandinavia having a political voice early in the 20th Century [71,114,127]. ...
Article
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The new estimates of the Maddison Project show that GDP per capita ratio at purchasing power parity (ppp) between Bolivia and Finland has changed from 0.68 ca. 1850 to 0.16 in 2015; similarly, that between Chile and Norway from 0.65 to 0.28. The aim of this article is to present a review of the literature and available quantitative evidence to understand how these extreme differences became possible between countries with similarly enormous natural resource endowments. Specifically, the article seeks to: (a) identify some stylized facts that may help understand the divergence between Andean and Nordic countries; (b) identify key historical processes that explain the divergent effect of natural resource abundance in Andean and Nordic economies. In order to achieve these objectives, four topics are covered: GDPpc, population, trade and taxation. The analysis comprises three Nordic countries (Finland, Norway and Sweden) and three Andean countries (Bolivia, Chile and Peru) from the mid-Nineteenth Century to present day. The sample size, time span covered and thematic approach provide new evidence regarding previous work.
... Roine & Waldenström showed that top income concentration in Sweden was similarly high at the onset of the 20th century as in other Western countries -although it decreased intensely thereafter. [127] The literature has, in any case, remarked the importance of the structure of land property, with small freeholders in Scandinavia having a political voice early in the 20th century.[71, 115,128] Administrative considerations should also be taken into account. ...
Preprint
Full-text available
The new estimates of the Maddison Project show that the p.p.p. GDP per capita ratio between Bolivia and Finland has changed from 0.68 ca. 1850 to 0.16 in 2015; similarly, that between Chile and Norway from 0.65 to 0.28. The aim of this article is to present a review of the literature and available quantitative evidence to understand how these extreme differences became possible between countries with similarly enormous natural resources endowments. Specifically, the article seeks to a) identify some stylised facts that may help understand the divergence between Andean and Nordic countries; b) highlight research questions that will guide further work about the divergent effect of natural resource abundance in Andean and Nordic economies. In order to achieve these objectives, four topics are covered: GDPpc, population, trade and taxation. The analysis comprises three Nordic countries (Finland, Norway, and Sweden) and three Andean countries (Bolivia, Chile, and Peru) from the mid-nineteenth century to present day. The sample size, time span covered and thematic approach provide new evidence regarding previous work. [1-3]
... Sweden is known as the country giving importance to gender equality since it is a welfare state, which means that Sweden endorses working families, supports parental leave, and encourages the gender equality in legal, political and cultural means. Although Sweden is an egalitarian society which meets economic efficiency and equity, pay gap is still a problem in Sweden (Roine and Waldenström, 2008). ...
Article
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One of the measurable indicators of inequality between female and male employees is considered as gender wage gap. Although there are governments that have developed policies to overcome injustice in getting different levels of wages for the same amount of work, gender wage gap does exist in the European Union (EU) with different proportions. To reveal the current gender wage gap situation, the precautions that were taken to handle this significant problem, reports, statistics, and policies were examined and compared in this paper. First the gender wage gap ratios and policies to handle this matter in the EU were presented, following that gender wage gap issue in Sweden and France was closely examined. In the discussion part, new implementation and policy suggestions were mentioned. The analysis of the international data and comparison of the two countries reveal that, gender wage gap appears with huge numbers even in the most developed countries in the EU.
... However, a more realistic approach to modern industrialized economies should take into account the fact that population on the top decile of capital income are also on the top decile of labor income. As a matter of fact, empirical evidence for countries as Sweden and Norway shows that the share of wage on total income for the top decile of the population constitutes approximately the 25% of income since the late XXth century [40,41]. ...
Article
In this paper we propose a non-conservative kinetic model of wealth exchange with saving of production as an extension of the Chakraborti-Chakrabarti model of money exchange. Using microeconomic arguments, we achieve rules of interaction between economic agents that depend on two exogenous parameters, the exchange aversion of the agents ($\lambda$) and the saving of production ($s$), such that in the limit $s=0$, these rules can be reduced to the ones of the Chakraborti-Chakrabarti model. The non-conservative dynamics are approached analytically through a mean field approximation and the Boltzmann kinetic equation. Both approximations allows us to compute a theoretical rate of exponential growth ($g$) and to fit the emergent distributions of wealth to a gamma probability density function, in such a way that $g$, the fit parameters and the Gini index can be expressed analytically in terms of $\lambda$ and $s$. In general, the emergent distributions do not reach a stationary state, however it is possible to study the emergence of self-similar distributions that hold the gamma pattern and maximize the Shannon entropy. With the purpose of addressing labor income, we explore additionally the effect of salary income in the model by defining a two-class structure where population is separated into workers and producers. This assumption leads to an emergent rate of economic growth $\widetilde{g}_e$. The macroeconomic implications of this model are studied by means of the wealth/income ratio, which can be predicted as $s/\widetilde{g}_e$, in accordance with the Solow model of economic growth. The results in this paper allow to tie some of the important facts of the modern economic speech, as well as the microeconomic theory, with some methods and ideas developed in the context of non-conservative exchange models.
... For the post-World War II period, we allow the data to select a single structural break in the time trends. 17 See for example Piketty (2007, 2010),Atkinson et al. (2011),Banerjee and Piketty (2005), andRoine and Waldenstrom (2008).Content courtesy of Springer Nature, terms of use apply. Rights reserved. ...
Article
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We propose a new method to approximate income distribution dynamics at the micro level using only macro data on aggregate moments of the income distribution. Under the assumption that individual incomes follow a lognormal autoregressive process, we show that the evolution of the mean and standard deviation of log income across individuals provides sufficient information to bound the degree of mobility. We estimate mobility bounds for 46 countries, using time series data on aggregate moments of the income distribution available in the World Inequality Database and the World Bank’s PovcalNet database. This new data allows us to study the correlates of mobility, and to document churning in the top and bottom of the income distribution, in a much larger set of countries than was previously possible.
... As mentioned earlier, SDO and LMs reciprocally shape each other (Derks et al., 2011;Zubielevitch et al., 2021). Carlsson et al. (2014) also acknowledged a socio-contextual influence since their study was conducted in Sweden where the concept of feminine jobs is different from other countries, and it has a relatively high level of nationwide gender equality (Roine & Waldenström, 2008). Likewise, in Scheuer and Loughlin's (2020) study, participants were older workers with experience working with young female leaders, signaling that the participants might be individuals with lower SDO and thus prefer HA occupations. ...
Article
Workplace backlash, the explicit/implicit, and/or intentional/unintentional attempts to reject efforts to promote diversity, taken by both dominant and subordinate social group members to maintain the group-based social hierarchy at work, has emerged as a major threat to fostering diversity and inclusiveness in the workplace. Although intense scholarly attention has been paid to workplace backlash, the literature has a highly individualistic and fragmented perspective of backlash, which hinders theoretical advancement. As a remedy for conceptual and theoretical heterogeneity, I first conducted a systematic review of the literature to present a critical overview of past scholarly endeavors and take stock of the empirical evidence. This article provides an alternative, unified definition of workplace backlash drawn from intergroup relations and the power hierarchy among social group members. Finally, based on the perspective of group-based social hierarchy, this study describes the emergence, development, and maintenance of workplace backlash through the lens of social dominance theory. Implications and future research suggestions are also discussed.
... In particular, we analyze the association between the two financial resources throughout the entire distribution and measure its contribution to inequality. Our analysis contributes to the nascent literature on the joint distribution of income and wealth that focuses mainly on the incidence of the jointly income rich and asset rich such as Roine and Waldenström (2008), Aaberge et al. (2018), Fisher et al. (2017), or Berman and Milanovic (2020). One notable exception is Jäntti et al. (2015) who find a positive association between income and wealth throughout the distribution and across countries using survey data. ...
Article
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Using tax data from the Swiss canton of Lucerne, we study how measures of economic inequality change if they account for income and wealth rather than income alone. Joint income-wealth, the sum of labor income and annuitized wealth, serves as a measure of combined inequality of income and wealth. Inequality measured using joint income-wealth is higher than measured using income alone. We refine existing annuitization techniques by introducing heterogeneous returns. The joint distribution of labor income and annuitized wealth displays strong tail dependence at the top and a negative association for negative annuitized wealth. A decomposition shows that the underlying marginal distributions of labor income and annuitized wealth account for most of joint income-wealth inequality, whereas their association matters only in the tails.
Article
I analyze selected views of the well-known Swedish analyst of Nordic economies, Nima Sanandaji, on the reasons for the economic (and social) successes of Sweden and other Nordic countries in the 20th and 21st centuries. My aim is not to provide a detailed and full appraisal of these views but to confront them with the arguments of Sanandaji's critics. Only occasionally do I supplement the arguments of Sanandaji's commentators with additional comments of my own. In particular, my interests include the following theses of Sanandaji: the thesis that Sweden's prosperity arose before the development of the welfare state, which contributed little to its creation; the thesis that other Swedish successes (health, small inequalities, equal opportunities) are wrongly attributed to the Swedish welfare state or are far from complete; the thesis that there is very limited scope for other countries to copy the Swedish (Nordic) experience. In the Conclusion, I comment on the reception of Sanandaji's views in Poland.
Chapter
This chapter focuses on the core of the Swedish capitalist class, owners of ‘large-scale’ capital, during 1914-2006. For investigating this class, a key assumption in the works of Marx and Weber is utilized: the dominant capitalist class of property holders is internally divided. It contains “active” members (engaged in the production and circulation of goods) as well as “thinking” members (engaged in the production and circulation of ideas); it contains “entrepreneurs” (producing new capital) as well as “rentiers” (living off inherited capital). One result is that a large portion of the wealthiest individuals are professionally active in other fields than the economic field, i.e. in other positions than as leaders of large capitalist corporations. This pattern in the social composition of the capitalist class has been remarkably stable during the twentieth century, unaffected by economic crises as well as the emergence of the Swedish Social Democratic welfare state. Another result is that the proportion of rentiers is greater in the thinking fraction than within the active fraction. The results illustrate the need to combine research on economic elites and studies of the reproduction of the top stratum of the capitalist class.
Preprint
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In recent years numerous studies published top income shares as way to assess the degree of income inequality. Top income shares measure how much percent of total income is captured by a certain top income group. Based on the assumption that high incomes follow a Pareto distribution, estimates from the World Inequality Database show that globally, the top 1% receive about 20% of world income. This number clearly suggests that income and power concentration is a serious issue. But what do top income related inequality measures really tell in terms of inequality and distribution of resources? The analysis of top incomes only takes incomes above a certain minimum threshold into consideration and leaves out income information below. This one-sided view on the income distribution gives reasons why related inequality measures may only pose a weak proxy for overall income inequality. In fact, as well-known researchers highlighted, a thorough analysis of inequality requires consideration of the complete income distribution. In that fashion, this paper takes a critical view on top incomes as means of measuring inequality.
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Objective We investigate recent trends in income inequalities in mortality and the shape of the association in Sweden. We consider all-cause, preventable and non-preventable mortality for three age groups (30–64, 65–79 and 80+ years). Design and setting Repeated cross-sectional design using Swedish total population register data. Participants All persons aged 30 years and older living in Sweden 1995–1996, 2005–2006 and 2016–2017 (n=8 084 620). Methods Rate differences and rate ratios for all-cause, preventable and non-preventable mortality were calculated per income decile and age group. Results From 1995 to 2017, relative inequalities in mortality by income increased in Sweden in the age groups 30–64 years and 65–79 years. Absolute inequalities increased in the age group 65–79 years. Among persons aged 80+ years, inequalities were small. The shape of the income–mortality association was curvilinear in the age group 30–64 years; the gradient was stronger below the fourth percentile. In the age group 65–79 years, the shape shifted from linear in 1995–1996 to a more curvilinear shape in 2016–2017. In the oldest age group (80+ years), varied shapes were observed. Inequalities were more pronounced in preventable mortality compared with non-preventable mortality. Income inequalities in preventable and non-preventable mortality increased at similar rates between 1995 and 2017. Conclusions The continued increase of relative (ages 30–79 years) and absolute (ages 65–79 years) mortality inequalities in Sweden should be a primary concern for public health policy. The uniform increase of inequalities in preventable and non-preventable mortality suggests that a more complex explanatory model than only social causation is responsible for increased health inequalities.
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This study demonstrates a long-run relationship between inequality and the bank debt to GDP ratio in Sweden in 1919-2012. The findings suggest that much of the impact of the top income share on the debt ratio comes from changes in the profit share. Earlier research claims that the rich, via the banks, have lent their savings to the poor as a substitute for wage gains, but this description seems ill-suited for Sweden. An alternative explanation is that banks consider profits to be an indicator of the safety of a loan. This is more in line with the study's findings. © 2017 The Author. Published by Oxford University Press on behalf of the European Historical Economics Society. All rights reserved.
Article
This study presents the new Gini coefficient and top income share series for Finland in the years 1865–1934 by utilizing Finnish tax statistics, which provide data on a poor country on the threshold of modern economic growth. Income inequality was relatively moderate in 1865, while famine (1867–1868) decreased it further. Income inequality increased substantially during the late nineteenth century, then declined during WWI and its aftermath, followed by another increase in inequality in the late 1920s that was halted by the Great Depression. The rising level of inequality before WWI fits well with the ideas of the Kuznets curve and maximum inequality, whereas the decline in inequality was due to shocks (e.g., civil war).
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In the 2000s, Swedish elementary and secondary school students’ scores in international assessments began to fall, which suggests both a long-term and substantial weakening of the Swedish school system. The chapter provides a detailed presentation of what is known about the performance of Swedish students before the first TIMSS assessment in 1995 and the subsequent decline in international tests. It shows that the downward trend in attainment is a result of deteriorating scores across the board, from the highest-performing students to those who obtain the lowest scores. Moreover, the chapter suggests that the decline in knowledge among Swedish students is likely to have strong effects on future economic growth. A rough calculation based on updated cross-country estimates suggests that the Swedish growth rate per capita may fall by 0.4–0.5 percentage points.
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The chapter shows how the educational trend of “post-truth” schooling continued in Sweden into the twenty-first century. It offers a close reading of the national curriculum that was in force at the time of writing (in 2021). The chapter also discusses how the Swedish school system in just a few years went from being very strictly regulated to being the polar opposite. These changes included a radical marketization of primary and secondary schooling that is unparalleled in any wealthy Western country. The chapter analyzes the school choice market in Sweden and describes how it interacts with postmodern social constructivist ideas, to the detriment of the teaching of knowledge in a classical sense.
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In many Western countries, school systems are in deep crisis. Average results are disappointing, differences across schools and neighborhoods are increasing, and a student’s family background and gender have become more decisive for how well he or she fares. The chapter provides some reflections on the way forward for Sweden and Western education in general. It suggests that a reform strategy involving a paradigm shift in what is arguably the most crucial institution of the school system—the stipulated view of truth and knowledge—has the potential to yield radical improvement.
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The final, two chapters aim to fulfill the promise of the previous chapters, and extends a fiscal sociological analysis to two examples. In a 2014 review of fiscal sociology, Martin and Prasad suggested that inequality, and development, needed to be considered from the perspectives of taxation. This chapter aims to do exactly that, starting with the example of Piketty’s proposal for a global tax on capital. Chapter 7 continues this analysis to the benefit cap litigation in the UK. These examples have been selected because of their significance in the post-financial crash era. In this chapter, the argument is advanced that Piketty’s proposal has the potential to be considered as a tax principle, as opposed to a tax rule—or, as Cooter described it, as an underlying value. The advantage of this approach is that it would afford Piketty’s proposal the opportunity of greater influence. As noted in the opening chapter (p. 8, supra) Piketty’s “global capital tax” already has had an impact on the OECD. The challenge, however, is that such a tax would not fit easily within existing tax principles in the UK, as a brief survey of important policy reviews seeks to establish. The aim of this review is to suggest that, in the context of tax, there often is something of an agreement on basic tax principles that are deeply embedded. If the conflict between principles is acknowledged at the outset, and if Piketty’s global capital tax were accepted on these terms, the prospect for success would increase. In the following chapter, the benefit cap litigation is reviewed. The conclusion from the application of a fiscal, sociological analysis to this subject is that the legal system aims to preserve the availability of the unpaid labour of women. Focusing only on economic modelling, and not on values (Cooter), norms (Prosser) and law (Ruffert), misses the point that budgeting and law have combined so as to provide a legal framework which does not protect women from suffering the brunt of budget controlling initiatives.
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Foreign observers of Sweden have attributed the country’s socially inclusive economic growth, which was sustained during nearly one hundred years, to the expansion of the Social Democratic welfare state. However, this analysis overlooks the fundamental causes of Sweden’s economic takeoff. The crucial feature that Sweden exhibited was its uniquely large and evenly distributed stock of human capital. A widespread appreciation for learning and the development of education from the 1600s onwards were the key drivers of the strong development. Against this background, the decline of the Swedish educational system should be cause for serious concern about the country’s future. The chapter provides a summary of the problems regarding schooling in Sweden and presents our view of their causes. The origin of Sweden’s academic decline is mainly attributable to a phenomenon that we refer to as “post-truth” schooling—education based on a postmodern social constructivist view of knowledge.
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The chapter describes the evolution of the view of knowledge in the Swedish school system. It begins in the immediate postwar years and ends in the mid-1990s with a discussion of the radical national curriculum enacted in 1994. This curriculum consolidated the paradigm of “post-truth” schooling. It expresses, explicitly or implicitly, many of the notions that are emblematic of the postmodern social constructivist view of knowledge. It suggests that there are no objectively established facts and that what is legitimized as knowledge is a product of social and historical forces. Moreover, the curriculum recommended mixing academic subjects, incorporating “deconstruction” into schoolwork, and giving students the major responsibility for the content of their education. The chapter demonstrates that the school system of Nazi Germany was grossly misinterpreted in Sweden to justify a view that the teaching of knowledge could potentially be subversive to democracy.
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There has never been a golden age in Swedish education. However, there was a “silver age” that began approximately in the second half of the nineteenth century and ended around 1960. The chapter outlines this history. It demonstrates that the established view of the previous school system is deeply misleading. In fact, an increasing share of young cohorts were offered excellent educational opportunities. After World War I, a truly national curriculum was introduced that imparted relevant knowledge and skills to students based on the principles of teacher-led presentation, repetition, and practice, and by matching the sequence of topics to each student’s maturity and prior knowledge. A key element in the modernization of the educational system was the state’s preoccupation with ensuring that highly qualified and motivated persons were attracted to the teaching profession.
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The chapter outlines two conflicting visions of knowledge: the classical view and the postmodern social constructivist view. According to the classical view, the purpose of schooling is to give students the kind of valuable knowledge and skills, including relevant knowledge of the wider culture in which they are expected to spend their lives as adults, that they cannot acquire in any other way. On the other hand, the postmodern social constructivist view rejects the existence of objective knowledge. In the context of schooling, this translates to a preference for student-directed pedagogy, the mixing of subjects, and an emphasis on developing generic critical thinking rather than on acquiring domain-specific knowledge. The chapter argues that the classical view is consistent with both modern scientific research and received wisdom. Moreover, it suggests that the stipulated view of knowledge is the single most important institution for the functioning and development of any school system.
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A significant drop in students’ knowledge and skills is not the only problem facing Sweden’s schools. The chapter discusses the emergence of a systemic malaise that includes grade inflation, increasing gender differences in performance, and declining civic mindedness. Moreover, the work environment is marred by rising levels of bullying, unacceptable levels of rule-breaking, truancy, and a high incidence of mental health problems. The chapter also discusses the deterioration of working conditions for teachers and the flight from the teaching profession. Teachers self-report that their professional status is low in society, teacher-training programs do not attract top-level students, roughly half of the students in those programs drop out, and a substantial share of those who graduate leave the profession after a couple of years. The wholesale introduction of NPM methods has robbed teachers of the professional autonomy that used to be a key element of the profession’s attractiveness.
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This chapter examines the determinants of wealth accumulation and inequality in the modern world. The conceptual framework adopted borrows heavily from Meade (Efficiency, equality, and the ownership of property. London: George Allen & Unwin, 1964; The just economy. London: George Allen & Unwin, 1975) and Saez and Zucman (Wealth inequality in the United States Since 1913: Evidence from capitalized income tax data (NBER Working Paper No. 20625). Retrieved from National Bureau of Economic Research website http://www.nber.org/papers/w20625, 2014), but contextualises their framework in a grander socioeconomic context. The aggregate trends examined in Chap 3. are explained against the backdrop of significant historical changes in the economic systems of several advanced economies.
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This survey discusses how capital should be taxed in advanced economies. We review the theoretical optimal tax literature, survey empirical studies on the distribution of capital and the distortionary costs of capital taxation, and analyze the desirability of specific taxes on capital income, wealth, property, inheritances, and corporate profits. Our overall conclusion is that capital taxation plays an important role in an optimal tax system, but only certain ways of taxing capital are able to strike a balance between optimality and administrative feasibility.
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We examine selection by class origin and gender in the emigration from Sweden to the United States during the age of mass migration. We use full-count census data linked to emigration lists to create a panel of over one million men and women. Class selection was similar for men and women, with children from medium-skilled backgrounds being most likely to leave. Selection on class origin was most pronounced in poorer and less industrialized regions, but similar in rural and urban areas. These patterns suggest that not only returns to skill determined migrant selection but also class-specific costs of migration.
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The chapter summarizes our main findings and examines the effects of “post-truth” schooling in combination with marketized education on students and teachers in Sweden. It does this in three parts. First, it discusses the deteriorating academic performance, including the gender difference in knowledge attainment and the rise of grade inflation. Then, it looks at the health and attitudes of students. Finally, the chapter discusses the unattractiveness of the teaching profession.
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A central aspect of the Swedish model was the labour market, distinguished by an egalitarian wage structure and by the particular configuration of two institutions: a centralised wage bargaining that followed upon the Saltsjöbad Agreement in 1938 and the solidaristic wage policy implemented in 1956. The literature argues that these institutions produced an outstanding compression of the wage structure from the late 1960s onwards. In contrast, we argue that this narrow post–World War II focus overlooks the historical dimension of the wage structure. The evidence presented here shows that a compression of the wage structure occurred in the late 1930s and 1940s. Previous research attributes this early episode of compression to market factors. In public investigations and periodicals of the 1940s, however, contemporary observers reckoned that special agreements between SAF and LO during World War II caused wage convergence. These agreements anticipated the solidaristic wage policy of the 1950s. We subject the market-factor view to a statistical test and show its explanatory insufficiency. We thereby corroborate the contemporaries’ view and conclude that the coexistence of the centralised agreements, the solidaristic wage policy, and wage convergence configured the rise of the Swedish model during World War II.
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The recent rise in income inequality in the United States (US) and the United Kingdom (UK) has to be seen in both international and historical context. Rising income inequality in Anglo-Saxon countries has not necessarily been followed in other OECD countries. The Netherlands is of particular interest on this account, since it has seen an impressive growth of employment since the 1980s, and its unemployment rate has been closer to that of the US than to the EU average. It is natural to ask how far this employment policy has involved increased inequality in market incomes. The recent developments have moreover to be seen in the light of the longer-run evolution of the personal income distribution. For much of the first three-quarters of the twentieth century the dominant tendency had been for a decline in inequality. Tony Crosland wrote in his Future of Socialism that in Britain "the distribution of personal income has become significantly more equal" (1964, page 31). In an article written in 1979, Jan Pen summarised the experience of the Netherlands as "a clear case of levelling". It is interesting to ask how far changes in the 1980s and 1 We are most grateful to Cees Nierop for carrying out the calculations for the Dutch data and
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A method is developed for using income-tax data to investigate the evolution of the highest incomes over virtually the entire 20th century. The income shares of the top 10, 5, 1, 0.5, 0.1, and 0.05 percent are analysed for the UK and the Netherlands. For considering the top shares among themselves the "Pareto-Lorenz coefficient" is proposed. Between the two countries, the top shares appear to undergo a strikingly similar and strong decline up to the mid-1970s. Since then British top shares have increased significantly while Dutch shares remained basically unchanged. This outcome parallels similar results for the US and France obtained by Piketty and Saez and poses interesting questions for research. (JEL: N34, D31, O15) Copyright (c) 2005 by the European Economic Association.
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Sweden has a remarkable record in reducing inequality and virtually eliminating poverty. This paper shows that: 1) Sweden achieved its egalitarian income distribution and eliminated poverty largely because of its system of earnings and income determination, not because of the homogeneity of the population nor of its educational system. 2) In the job market Sweden is distinguished by a relatively egalitarian distribution of hours of work among those employed, which may be an interrelated part of the Swedish economic system, and until the recent recession, by a high employment rate. 3) Tax and transfer policies contribute substantially to Sweden's overall distribution record. In contrast to many social welfare systems, Sweden's is largely a workfare system, providing benefits for those with some work activity. 4) Part of Sweden's historic success in maintaining jobs for low wage workers while raising their wages resulted from policies that directly or indirectly buttress demand for low skill workers, notably through public sector employment. 5) Sweden's tax and transfer policies have maintained the position of lower income workers and families, including those with children, during its recent economic decline.
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A basic tenet of economic science is that productivity growth is the source of growth in real income per capita. But our results raise doubts by creating a direct link between macro productivity growth and the micro evolution of the income distribution. We show that over the entire period 1966-2001, as well as over 1997-2001, only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth. Growth in median real wage and salary income barely grew at all while average wage and salary income kept pace with productivity growth, because half of the income gains went to the top 10 percent of the income distribution, leaving little left over for the bottom 90 percent. Half of this inequality effect is attributable to gains of the 90th percentile over the 10th percentile; the other half is due to increased skewness within the top 10 percent. In addition to its micro analysis, this paper also asks whether faster productivity growth reduces inflation, raises nominal wage growth, or raises profits. We find that an acceleration or deceleration of the productivity growth trend alters the inflation rate by at least one-for-one in the opposite direction. This paper revives research on wage adjustment and produces a dynamic interactive model of price and wage adjustment that explains movements of labor's share of income. What caused rising income inequality? Economists have placed too much emphasis on "skill-biased technical change" and too little attention to the sources of increased skewness at the very top, within the top 1 percent of the income distribution. We distinguish two complementary explanations, the "economics of superstars," i.e., the pure rents earned by sports and entertainment stars, and the escalating compensation premia of CEOs and other top corporate officers. These sources of divergence at the top, combined with the role of deunionization, immigration, and free trade in pushing down incomes at the bottom, have led to the wide divergence between the growth rates of productivity, average compensation, and median compensation.
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This paper starts out with a brief discussion of the historical background, the justifications and the political forces behind the built up of the modern welfare state. It also summarizes its major achievements in terms of economic efficiency and redistribution. The paper also tries to identify some major problems of contemporary welfare-state arrangements, differentiating exogenous shocks from endogenous behaviour adjustments by individuals to the welfare state itself. The latter include tax distortions, moral hazard, and endogenous changes in social norms concerning work and benefit dependency.
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We analyze the development of the Swedish ownership model after World War II. The controlling ownership in Swedish firms is typically concentrated to one or two owners. Often, but not always, the controlling owners are Swedish families. Thus, the model resembles the typical corporate control model of Continental Europe. A distinguishing feature of the Swedish model is that control is typically based on a smaller capital base than in other European countries. This feature is a result of a seemingly paradoxical policy concerning private ownership. Tax policy has consistently disfavored the accumulation of private wealth, but at the same time corporate law has greatly facilitated the wielding of control based on a small equity base. Our analysis shows that the large gap between ownership and control makes the Swedish corporate control model both politically and economically unstable. The major political threat to date has been the proposal of the Swedish Trade Union Congress (the LO) and the Social Democratic Party to introduce a scheme that would result in the gradual takeover of the Swedish corporate sector by union-controlled wage-earner funds. After the political defeat of this proposal in the 1980’s economic policy was changed in a more market liberal direction. This policy change has uncovered the economic instability of the model. The weak financial base of the controlling owners makes it difficult for them to take an active part in the current international restructuring of the corporate sector. Two forces are now seen as the major threat to the Swedish ownership model: (a) a rapidly increasing foreign takeover of Swedish firms and (b) large state and corporatist pension funds. Their financial assets are far larger than those of today’s dominant control owners and extensive mandatory and/or tax-favored systems for pensions saving ascertain that their relative financial strength will continue to grow sharply in the future.
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Comparing the distribution of top incomes across countries raises many methodological problems, including differences in tax legislation and in tax avoidance, the definition of the income unit, and the definition of a control total for income. The paper considers the significance of these problems in three applications: comparing top income shares at a point in time, analysing the extent of convergence or divergence over time, and setting national changes in the context of the world distribution of income.
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The evolution of income distribution over two centuries is an attractive topic because it allows one to test the inverse U-curve hypothesis using long series instead of cross-section data. In Section 1 the distribution trends in countries where global data are available, is considered, that is in four Scandinavian countries, the Netherlands, the German states and Germany, and in France. The inverse U-curve hypothesis is verified in four of them. Section 2 presents in a consistent framework, using the Theil indicator, all available information on inequality trends between agricultural and nonagricultural sectors and on inequality trends within each sector in European countries. Finally Section 3 throws light on the political and economic factors explaining the long-term evolution of distribution. The economic factors playing a key role are the market structures, the diffusion of education and saving, and dualism.
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The use of taxation data to create long-run top incomes series for several developed nations has led to speculation about the factors driving fluctuations in these series. We combine the series for five Anglo-Saxon countries: Australia, Canada, New Zealand, the UK, and the US. Across these five countries, the shares of the very richest exhibit a strikingly similar pattern, falling in the three decades after World War II, before rising sharply from the mid-1970s onwards. The share of the top 1% is highly correlated across Anglo-Saxon countries, more so than the share of the next 4%. In each of the five countries, a reduction in the marginal tax rate on wage income is associated with an increase in the share of the top percentile group. Likewise, a fall in the marginal tax rate on investment income (based on a lagged moving average) is associated with a rise in the share of the top percentile group. While the wage tax effect is not robust to including controls for stockmarket returns and GDP growth, the investment tax effect persists even after the inclusion of these controls. When the top marginal tax rate is used to instrument for the median marginal rate paid by the top percentile group, the magnitude of the effect of taxation on top income shares becomes larger still.
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The paper enquires into the relationship between economic inequality and economic growth, but different from others, it also studies the relationship between inequality and economic growth in the situation where consideration of effect of factor movement is included. The paper tends to answer the questions such as whether inequality should be eradicated completely. Panel data models are used for the empirical study. Through the study, we aim to find out more clearly what are the effects of economic inequality on economic growth of the world, the developing countries, and the developed countries respectively, and what factors are helpful for economic growth and effectively cope with economic inequality.
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This chapter reviews the evidence on cross-national comparisons of annual disposable income inequality in over 20 wealthy nations. We begin by reviewing a number of conceptual and measurement issues which must be addressed by any cross-national comparison of survey-based household income data. With these caveats in mind, we present data on both the level of inequality during the early to mid-1990s, and in inequality trends since 1970. While most comparisons are made in terms of relative incomes within nations, we also make some real income comparisons at a point in time using purchasing power parities. The data indicate that a wide range of inequality exists across these rich nations during this decade, with the most unequal nation experiencing a level of inequality which is more than twice the level found in the most equal nation. Country specific trends in income inequality are more similar, although not universally so. The large majority of nations have experienced rising income inequality over the last decade or longer. This increase is not offset by changes in income mobility over this period, and follows a period of declining income inequality in most of these same nations.
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Thesis--Uppsala. Includes bibliographical references (p. 225-[228]).
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This paper uses data from income tax returns (191598), wage tax returns (191998), and inheritance tax returns (190294) in order to compute homogeneous, yearly estimates of income, wage, and wealth inequality for twentieth-century France. The main conclusion is that the decline in income inequality that took place during the first half of the century was mostly accidental. In France, and possibly in a number of other countries as well, wage inequality has been extremely stable in the long run, and the secular decline in income inequality is for the most part a capital income phenomenon. Holders of large fortunes were badly hurt by major shocks during the 191445 period, and they were never able to fully recover from these shocks, probably because of the dynamic effects of progressive taxation on capital accumulation and pretax income inequality.
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This paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the United States using individual tax returns data. Top income and wages shares display a U-shaped pattern over the century. Our series suggest that the large shocks that capital owners experienced during the Great Depression and World War II have had a permanent effect on top capital incomes. We argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks. Top wage shares were flat before World War II, dropped precipitously during the war, and did not start to recover before the late 1960s but are now higher than before World War II. As a result, the working rich have replaced the rentiers at the top of the income distribution.
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This paper presents new homogeneous series on top income shares in Germany (1891-1998) and Switzerland (1933-1995), using data from income tax returns. The general pattern is consistent with recent results for France: the secular decline in income inequality is for the most part an accidental, capital income phenomenon. Very top incomes were badly hurt by the major shocks of the 1914-1945 period and never fully recovered afterwards. Since 1945, top income shares have been relatively stable, with no rise during recent years (unlike in the U.S. The striking episode before WWII is how Nazi power brought top income shares to almost double within five years. The striking result after WWII is that German top incomes are more concentrated within the top decile than in other industrialized countries. Thus the German super-rich were richer than their American counterparts until the 1990s. This puzzle is related to the much lower inheritance tax rates observed in Germany since WWII. (JEL: N33, N34, H23, H24) Copyright (c) 2005 The European Economic Association.
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Comparing the distribution of top incomes across countries raises many methodological problems, including differences in tax legislation and in tax avoidance, the definition of the income unit, and the definition of a control total for income. The paper considers the significance of these problems in three applications: comparing top income shares at a point in time, analysing the extent of convergence or divergence over time, and setting national changes in the context of the world distribution of income. (JEL: D31) Copyright (c) 2005 The European Economic Association.
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Sweden's distribution of disposable income is very even, with a Gini coefficient of just 0.31. Yet, the wealth distribution is extremely unequal, with a Gini coefficient of 0.79. Moreover, Swedish wealth inequality is to a very large extent driven by the large fraction of households with zero or negative wealth. In this paper, we ask to what extent the resditributive public pension scheme is responsible for these features of the data. To address this question, we study the properties of two overlapping generations economies with uninsurable idiosyncratic risk. The first has a pension system modeled o the actual one, the second has no public pension scheme at all. Our findings support the view that the public pension scheme is to a large extent responsible for the features of the data that we focus on. (Copyright: Elsevier)
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We analyse the change in family gross income inequality between 1951 and 1973. We use two new samples of the Swedish population from 1951 and 1956 containing tax register data, and compare the results with those obtained from the Swedish Level of Living survey from 1967 and 1973. Gini coefficients, four different Generalised entropy measures as well as decile group shares of total income are calculated. We also do two different decompositions: one between different demographic groups and one between the male and female component of family income. Finally, we examine to what extent zero family income records really reflect low economic welfare by using interview data from the 1968 Swedish Level of Living Survey.
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This paper presents new homogeneous series on top shares of income from 1920 to 2000 in Canada using personal income tax return data. Top income shares display a U-shaped pattern over the century, with a precipitous drop during World War II, followed by a slower decline until 1970. Since the late 1970s, top income shares have been increasing steadily and the very top shares are now as high as in the pre-war era. As in the United States, the recent increase in top income shares is the consequence of a surge in top wages and salaries. As a result, series on the composition of incomes within the top income groups from 1946 to 2000 show a dramatic increase in the share of wages and salaries. The parallel evolution of top income shares in Canada and the United States, associated with much more modest marginal tax rate cuts in Canada, suggests that the upward trend in top shares in Canada since the late 1970s cannot be explained by tax cuts. Further evidence suggests that the upward trend in Canada derives from the United States, perhaps because many Canadians have an emigration option. A data appendix for this paper is available.</a href>
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This paper use income tax return data from 1960 to 2000 to analyze the link between reported incomes and marginal tax rates. Only the top 1% incomes show evidence of behavioral responses to taxation. The data displays striking heterogeneity in the size of responses to tax changes overtime, with no response either short-term or long-term for the very large Kennedy top rate cuts in the early1960s, and striking evidence of responses, at least in the short-term, to the tax changes since the 1980s. The 1980s tax cuts generated a surge in business income reported by high income individual taxpayers due to a shift away from the corporate sector, and the disappearance of business losses for tax avoidance. The Tax Reform Act of 1986 and the recent 1993 tax increase generated large short-term responses of wages and salaries reported by top income earners, most likely due to re-timing in compensation to take advantage of the tax changes. However, it is unlikely that the extraordinary trend upward of the shares of total wages accruing to top wage income earners, which started in the 1970s and accelerated in the 1980s and especially the late 1990s, can be explained solely by the evolution of marginal tax rates.
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Using taxation statistics, we estimate the income share held by top income groups in New Zealand over the period 1921-2002. We find that the income share of the richest fell during the 1930s, rose again after World War II, and steadily declined from the late-1950s until the mid-1980s. From the mid-1980s until the mid-1990s, top income shares rose rapidly. We also estimate shares-within-shares, and find that the income share of the super-rich as a share of the rich followed a similar trajectory, rising sharply over the past quarter-century. Throughout the twentieth century, top income shares in New Zealand followed a very similar pattern to top income shares in Australia. We speculate that the reduction in top marginal tax rates, the deregulation of the economy, and the internationalisation of the market for English-speaking CEOs may have contributed to the recent rise in top income shares.
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The objective of this research is to document and to explain trends in inequality in 20th century France. Data from income tax returns (1915-98), wage tax returns (1919-98) and inheritance tax returns (1902-94), is used in order to compute fully homogeneous, yearly estimates of income inequality, wage inequality and wealth inequality. The main conclusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental. In France and possibly in a number of other developed countries as well wage inequality has actually been extremely stable in the long run, and the secular decline in income inequality is for the most part a capital income phenomenon. Holders of very large fortunes were severely hit by major shocks during the 1914-45 period, and were never able to fully recover from these shocks, probably because of the dynamic effects of progressive taxation on capital accumulation and pre-tax income inequality.
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Using taxation statistics, we estimate the income share held by top income groups in Australia over the period 1921-2003. We find that the income share of the richest fell from the 1920s until the mid-1940s, rose briefly in the postwar decade, and then declined until the early 1980s. During the 1980s and 1990s, top income shares rose rapidly. At the start of the twenty-first century, the income share of the richest was higher than it had been at any point in the previous 50 years. Among top income groups, recent decades have also seen a rise in the share of top income accruing to the super-rich. Trends in top income shares are similar to those observed among other elite groups, such as judges, politicians, top bureaucrats and chief executive officers. Copyright © 2007 The Economic Society of Australia.
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This paper focuses on three issues. First, it analyzes the increasing inequality of wealth in Sweden in terms of percentile age and birth cohort differences, and finds very weak evidence of life-cycle savings. There are rather strong birth cohort differences in wealth accumulation. Second, it is shown that bequests and inter vivo gifts contribute to the age and cohort differences in wealth, but do not increase the inequality of wealth. The third theme is mobility of wealth as a function of bequests, age, period, length of the transition period, and the magnitude of quantile differences. Copyright 2004 Blackwell Publishing Ltd.
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This paper presents homogeneous series on top shares of income and wealth in Switzerland since 1913 using personal income and wealth tax return statistics. In contrast to other countries such as Canada, France, the United Kingdom, the Netherlands or the United States, top income and wealth shares in Switzerland are strikingly flat over the century, and display no secular downtrend from the early part of the century to the post-World War II period. Switzerland hardly ever implemented a very progressive income and wealth tax structure and top income and wealth tax rates have been very low relative to other developed countries. Therefore, our findings for Switzerland lead much credence to the view that the development of very progressive taxation is the central factor explaining the sustained decline in wealth and income concentration in countries such as Canada, France, the United Kingdom, the Netherlands, or the United States.
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This article aims to throw light on why inequality in the distribution of income in Sweden fell from the mid-1920s to the second half of the 1950s. A new database has been created by coding tax records and other documents for the city of G teborg. In the analysis the Gini-coefficient and its changes are decomposed by income source. The information shows that in the mid-1920s income in urban Sweden was fairly unequally distributed. The compression of the income distribution came about as real income at the lower end increased rapidly, while the real income of the most affluent decile remained more or less constant. Much of the initial decrease in income inequality was due to capital income decreasing in average size and in addition becoming less extremely concentrated at the top of the income distribution. From the mid-1930s onward households paid ever larger shares of their income as income taxes which caused income inequality to decrease.