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

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Author Info
Domeij, David () (Dept. of Economic Statistics, Stockholm School of Economics)

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Abstract

This paper decomposes the rise in cross-sectional earnings inequality in Sweden between 1990 and 2002 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, and compares the Swedish experience with that in the U.S. The rise in earnings inequality is in both countries 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 is however entirely accounted for by changes in prices and residual dispersion.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 639.

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Length: 30 pages
Date of creation: 03 Oct 2006
Date of revision:
Handle: RePEc:hhs:hastef:0639

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Related research
Keywords: Earnings; inequality; Sweden; United States;

Other versions of this item:

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!]
  2. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. Johansson, Mats, 2006. "Inkomst och ojämlikhet i Sverige 1951-2002," Arbetsrapport 2006:3, Institute for Futures Studies. [Downloadable!]
  5. 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. [Downloadable!]
    Other versions:
  6. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March. [Downloadable!] (restricted)
    Other versions:
  7. T. N. Srinivasan, 1997. "Introduction," Economics and Politics, Blackwell Publishing, vol. 9(3), pages 205-205, November. [Downloadable!] (restricted)
  8. 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. [Downloadable!]
    Other versions:
  9. John McMillan & Michael Rothschild & Robert Wilson, 1997. "Introduction," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(3), pages 425-430, 09. [Downloadable!] (restricted)
  10. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September. [Downloadable!] (restricted)
  11. R. H. Parker, Y. Lemarchand, T. Boyns, 1997. "Introduction," Accounting, Business and Financial History, Taylor and Francis Journals, vol. 7(3), pages 251-257, November. [Downloadable!] (restricted)
  12. 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. [Downloadable!] (restricted)
  13. 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.
  14. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Thomas Lemieux, 2002. "Decomposing changes in wage distributions: a unified approach," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 646-688, November. [Downloadable!] (restricted)
  16. Magnus Gustavsson, 2007. "The 1990s rise in Swedish earnings inequality -- persistent or transitory?," Applied Economics, Taylor and Francis Journals, vol. 39(1), pages 25-30, January. [Downloadable!] (restricted)
  17. 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. [Downloadable!] (restricted)
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