Searching for Optimal Inequality/Incentives
AbstractThis paper examines the evolution of economic inequality in Sweden before, during and after the major macro-economic recession in the early 1990s. Earnings and income inequality increased after the downturn, but government safety net programs buttressed disposable income for those with low income, and despite the rise in inequality, Sweden remained one of the most egalitarian economies in the world. The rise in inequality raised the return to observable skills, but the returns are still too low to explain that Sweden moved to the top of the league tables in knowledge intensive activities. Our analysis of attitudes to inequality shows that more Swedes expressed more concern over the inequity in inequality after the rise in inequality in the 1990s than in the past. Further, more Swedes expressed greater dissatisfaction with wages and working conditions. On the other hand, the rise in unemployment did not reduce overall subjective well being, probably because individuals adapted to higher levels of unemployment.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14014.
Date of creation: May 2008
Date of revision:
Publication status: published as Anders Björklund, Richard B. Freeman. "Searching for Optimal Inequality/Incentives," in Richard B. Freeman, Birgitta Swedenborg and Robert Topel, editors, "Reforming the Welfare State: Recovery and Beyond in Sweden" University of Chicago Press (2010)
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Other versions of this item:
- J0 - Labor and Demographic Economics - - General
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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