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Trends in top income shares in Finland in 1966- 2007

Author

Listed:
  • Marja Riihelä
  • Risto Sullström
  • Matti Tuomala

    (School of Management, University of Tampere)

Abstract

This paper provides new evidence about the evolution of top incomes in Finland over the period 1966-2007. Using micro data we construct estimates of shares of top income groups. The paper shows how the proportion of income earned by the very richest one per cent has changed over time. It shows a U-shaped pattern over this period. The total share of the highest earners fell consistently between the mid 1960s and the beginning of the 1990s but then began to rise. The results bring out clearly how the major equalization from the mid 1960s to the mid 1990s has been reversed, taking the shares of top income groups back to levels of inequality or even higher found 40 years ago. The main factor that has driven up the top one per cent income share in Finland after the mid 1990s is in an unprecedented increase in the fraction of capital income which is in 2007 62 per cent of incomes in the top one per cent group. In 1990 this fraction was 14 per cent. Therefore the composition of high incomes at the end of period considered is very different from those earlier years of this period. We argue in this paper that the 1993 tax reform is one of the key factors responsible for this trend. Our results suggest that the decline in income progressivity since the mid 1990s is a central factor explaining the increase of top income shares in Finland.

Suggested Citation

  • Marja Riihelä & Risto Sullström & Matti Tuomala, 2010. "Trends in top income shares in Finland in 1966- 2007," Working Papers 1078, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:1078
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    File URL: http://urn.fi/urn:isbn:978-951-44-8056-0
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    References listed on IDEAS

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    1. Seppo Laaksonen, 1989. "Use of panel data in applications of income dynamics," Finnish Economic Papers, Finnish Economic Association, vol. 2(1), pages 55-64, Spring.
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    Cited by:

    1. Rolf Aaberge & Anthony B. Atkinson & Sebastian Königs, 2018. "From classes to copulas: wages, capital, and top incomes," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(2), pages 295-320, June.
    2. Roberto Iacono & Elisa Palagi, 2020. "Still the lands of equality? On the heterogeneity of individual factor income shares in the Nordics," LEM Papers Series 2020/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Sami Remes, 2022. "Decomposition of the Shrinking Middle-class and Directional Mobility in Finland 1995–2012," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1281-1312, August.
    4. Roberto Iacono, 2019. "The Norwegian Oil Bonanza and the Scandinavian Model in Comparative Perspective," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 63-82, March.
    5. Iacono Roberto & Palagi Elisa, 2022. "Still the Lands of Equality? Heterogeneity of Income Composition in the Nordics, 1975–2016," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 22(2), pages 221-268, April.
    6. Atanu Ghoshray & Issam Malki & Javier Ordóñez, 2022. "On the long-run dynamics of income and wealth inequality," Empirical Economics, Springer, vol. 62(2), pages 375-408, February.
    7. Christoph A. Schaltegger & Christoph Gorgas, 2011. "The Evolution of Top Incomes in Switzerland over the 20th Century," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(IV), pages 479-519, December.
    8. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, Tampere University, Faculty of Management and Business, Economics.
    9. Lehmus, Markku, 2014. "Distributional and employment effects of labour tax changes in Finland," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 107-120.
    10. Steven Pressman, 2013. "Justice and History: the big problem of Wilt Chamberlain," Economic Issues Journal Articles, Economic Issues, vol. 18(1), pages 1-16, March.

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