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Common Trends and Shocks to Top Incomes – A Structural Breaks Approach

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Author Info
Roine, Jesper () (Stockholm School of Economics)
Waldenström, Daniel () (Research Institute of Industrial Economics (IFN))

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Abstract

In this paper we use newly compiled top income share data to estimate common breaks and trends across countries over the twentieth century. By using the most re-cent structural breaks techniques, our approach both confirms previous notions and offers new insights. In particular, the division into an Anglo-Saxon and a Continental European experience does not seem to be as clear cut as previously suggested. Some continental European countries have had increases in top income shares, just as in the Anglo-Saxon countries, but typically with a lag. Most notably, we find that the Nordic countries display a marked “Anglo-Saxon” pattern, with sharply increased top income shares. Unlike in the Anglo-Saxon countries, however, including realized capital gains seems important in these countries. Our results help inform theories about the causes of the recent rise in inequality.

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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 801.

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Length: 31 pages
Date of creation: 16 Jun 2009
Date of revision:
Handle: RePEc:hhs:iuiwop:0801

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Related research
Keywords: Top Incomes; Income Inequality; Economic Development; Common Structural Breaks;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
D30 - Microeconomics - - Distribution - - - General
N30 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - General, International, or Comparative

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  3. Simon Kuznets & Elizabeth Jenks, 1953. "Shares of Upper Income Groups in Income and Savings," NBER Books, National Bureau of Economic Research, Inc, number kuzn53-1.
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  5. 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. [Downloadable!] (restricted)
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  6. 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 Social Sciences, Australian National University. [Downloadable!]
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  8. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2009. "The long-run determinants of inequality: What can we learn from top income data?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 974-988, August. [Downloadable!] (restricted)
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  14. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22. [Downloadable!]
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  15. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
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  17. 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(2005-2), pages 67-150. [Downloadable!]
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