This paper examines the long-run determinants of the evolution of top income shares. Using a newly assembled panel of 16 developed countries over the entire twentieth century, we find that financial development disproportionately boosts top incomes. This effect appears to be particularly strong during the early stages of a country’s development. Economic growth is strongly pro-rich which is inconsistent with globalized labor markets determining the incomes of elites. Furthermore, international trade is not associated with increases in top incomes on average, but is so in Anglo-Saxon countries. Finally, tax progressivity has a significant negative effect on top income shares whereas government spending has no such clear impact on inequality.
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number
2007:17.
Length: 39 pages Date of creation: 29 Sep 2007 Date of revision: Handle: RePEc:hhs:sunrpe:2007_0017
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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) N30 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth - - - General, International, or Comparative
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