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Rising Earnings Inequality in Sweden: The Role of Composition and Prices

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  • David Domeij

Abstract

The rise in cross-sectional earnings inequality in Sweden between 1990 and 2002 is decomposed into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables. The Swedish experience is then compared with that in the United States. In both countries, the rise in earnings inequality is a consequence of rising upper-tail dispersion. Contrary to the U.S. experience, where the rise is largely driven by changing market prices of observables and increased residual dispersion, shifts in the Swedish labor-force composition have contributed positively to the rise in the p90-p50 gap. The rise in the Swedish p99-p90 gap, however, is entirely accounted for by changes in prices and residual dispersion. Copyright � The editors of the "Scandinavian Journal of Economics" 2008 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 110 (2008)
Issue (Month): 3 (09)
Pages: 609-634

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Handle: RePEc:bla:scandj:v:110:y:2008:i:3:p:609-634

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  1. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September.
  2. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," Harvard Institute of Economic Research Working Papers 2096, Harvard - Institute of Economic Research.
  3. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
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  6. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  7. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics.
  8. Peter Gottschalk & Sheldon Danziger, 2003. "Wage Inequality, Earnings Inequality and Poverty in the U.S. Over the Last Quarter of the Twentieth Century," Boston College Working Papers in Economics 560, Boston College Department of Economics.
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  10. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  11. Johansson, Mats, 2006. "Inkomst och ojämlikhet i Sverige 1951-2002," Arbetsrapport 2006:3, Institute for Futures Studies.
  12. Magnus Gustavsson, 2007. "The 1990s rise in Swedish earnings inequality -- persistent or transitory?," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 25-30.
  13. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  14. Richard B. Freeman & Robert Topel & Birgitta Swedenborg, 1997. "The Welfare State in Transition: Reforming the Swedish Model," NBER Books, National Bureau of Economic Research, Inc, number free97-1, octubre-d.
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Cited by:
  1. Adermon, Adrian & Gustavsson, Magnus, 2011. "Job Polarization and Task-Biased Technological Change: Sweden, 1975–2005," Working Paper Series 2011:15, Uppsala University, Department of Economics.
  2. Domeij, David & Floden, Martin, 2009. "Inequality Trends in Sweden 1978-2004," Working Paper Series in Economics and Finance 720, Stockholm School of Economics.

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