Roine, Jesper () (Stockholm School of Economics) Vlachos, Jonas () (Stockholm University) Waldenström, Daniel () (Research Institute of Industrial Economics (IFN))
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This paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century. We focus on three groups of income earners: the rich (P99-100), the upper middle class (P90-99), and the rest of the population (P0-90). The results show that periods of high economic growth disproportionately increases the top percentile income share at the expense of the rest of the top decile. Financial development is also pro-rich and the outbreak of banking crises is associated with reduced income shares of the rich. Trade openness has no clear distributional impact (if anything openness reduces top shares). Government spending, however, is negative for the upper middle class and positive for the nine lowest deciles but does not seem to affect the rich. Finally, tax progressivity reduces top income shares and when accounting for real dynamic effects the impact can be important over time.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
721.
Length: 47 pages Date of creation: 16 Oct 2007 Date of revision:
30 Apr 2008 Handle: RePEc:hhs:iuiwop:0721
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden Phone: +46 8 665 4500 Fax: +46 8 665 4599 Email: Web page: http://www.ifn.se/ More information through EDIRC
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Find related papers by JEL classification: D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution F10 - International Economics - - Trade - - - General G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data) H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General N30 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - General, International, or Comparative
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