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Rising Earnings Inequality in Sweden: The Role of Composition and Prices

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  • David Domeij

Abstract

The rise in cross‐sectional earnings inequality in Sweden between 1990 and 2002 is decomposed into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables. The Swedish experience is then compared with that in the United States. In both countries, the rise in earnings inequality is a consequence of rising upper‐tail dispersion. Contrary to the U.S. experience, where the rise is largely driven by changing market prices of observables and increased residual dispersion, shifts in the Swedish labor‐force composition have contributed positively to the rise in the p90–p50 gap. The rise in the Swedish p99–p90 gap, however, is entirely accounted for by changes in prices and residual dispersion.

Suggested Citation

  • David Domeij, 2008. "Rising Earnings Inequality in Sweden: The Role of Composition and Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(3), pages 609-634, September.
    • Handle: RePEc:bla:scandj:v:110:y:2008:i:3:p:609-634
    DOI: 10.1111/j.1467-9442.2008.00553.x
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    Cited by:

    1. Adermon, Adrian & Gustavsson, Magnus, 2011. "Job Polarization and Task-Biased Technological Change: Sweden, 1975–2005," Working Paper Series, Center for Labor Studies 2011:11, Uppsala University, Department of Economics.
    2. Benjamin Friedrich & Lisa Laun & Costas Meghir, 2022. "Earnings dynamics of immigrants and natives in Sweden 1985–2016," Quantitative Economics, Econometric Society, vol. 13(4), pages 1803-1847, November.
    3. David Domeij & Martin Floden, 2010. "Inequality Trends in Sweden 1978-2004," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 179-208, January.
    4. Ronja Grundsten, 2015. "Immigration and Income inequality in Sweden," LIS Working papers 638, LIS Cross-National Data Center in Luxembourg.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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