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

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  • Roine, Jesper

    (Stockholm School of Economics)

  • Waldenström, Daniel

    ()
    (Research Institute of Industrial Economics)

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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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 667.

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Length: 38 pages
Date of creation: 21 Jun 2006
Date of revision:
Handle: RePEc:hhs:iuiwop:0667

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Keywords: Income inequality; Income distribution; Wealth distribution; Top incomes; Welfare state; Sweden; Taxation; Capital gains;

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  1. Anders Bjorklund & Richard B. Freeman, 1997. "Generating Equality and Eliminating Poverty, the Swedish Way," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 33-78 National Bureau of Economic Research, Inc.
  2. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
  3. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
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  5. Simon Kuznets, 1950. "Shares of Upper Income Groups in Income and Savings," NBER Books, National Bureau of Economic Research, Inc, number kuzn50-1.
  6. Facundo Alvaredo & Emmanuel Saez, 2007. "Income and wealth concentration in Spain in a historical and fiscal perspective," PSE Working Papers halshs-00587714, HAL.
  7. Dell, Fabien & Piketty, Thomas & Saez, Emmanuel, 2005. "Income and Wealth Concentration in Switzerland Over the 20th Century," CEPR Discussion Papers 5090, C.E.P.R. Discussion Papers.
  8. Henrekson, Magnus & Jakobsson, Ulf, 2003. "The Swedish Model of Corporate Ownership and Control in Transition," Working Paper Series 593, Research Institute of Industrial Economics.
  9. Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
  10. Roine, Jesper & Waldenström, Daniel, 2005. "Top Incomes in Sweden over the Twentieth Century," Working Paper Series in Economics and Finance 602, Stockholm School of Economics.
  11. Emmanuel Saez, 2004. "Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications," NBER Working Papers 10273, National Bureau of Economic Research, Inc.
  12. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers 5419, C.E.P.R. Discussion Papers.
  13. Gustafsson, Bj rn & Johansson, Mats, 2003. "Steps toward equality: How and why income inequality in urban Sweden changed during the period 1925 1958," European Review of Economic History, Cambridge University Press, vol. 7(02), pages 191-211, August.
  14. Anders Björklund & Mårten Palme, 2000. "The Evolution of Income Inequality During the Rise of the Swedish Welfare State1951 to 1973," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 26, pages 115-128.
  15. A.B. Atkinson & Andrew Leigh, 2006. "The Distribution of Top Incomes in Australia," CEPR Discussion Papers 514, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  16. Anthony B. Atkinson & Wiemer Salverda, 2005. "Top Incomes In The Netherlands And The United Kingdom Over The 20th Century," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 883-913, 06.
  17. Anthony B. Atkinson, 2005. "Comparing the Distribution of Top Incomes Across Countries," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 393-401, 04/05.
  18. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September.
  19. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 67-150.
  20. Lindbeck, Assar, 2006. "The Welfare State -- Background, Achievements, Problems," Working Paper Series 662, Research Institute of Industrial Economics.
  21. A. B. Atkinson & Andrew Leigh, 2005. "The Distribution of Top Incomes in New Zealand," CEPR Discussion Papers 503, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  22. Apel,M., 1994. "An Expenditure-Based Estimate of Tax Evasion in Sweden," Papers 1, Uppsala - Working Paper Series.
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  1. ”Arbetslinjen” medför barnfattigdom
    by Fred in Fred Torssander on 2012-05-31 16:43:31
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