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Trends in top income shares in Finland 1966-2007

Author

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  • Sullström, Risto
  • Riihelä, Marja
  • Tuomala, Matti

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 has contributed to this trend. Our results suggest that tax reform has declined tax progressivity and increased top income shares in Finland.

Suggested Citation

  • Sullström, Risto & Riihelä, Marja & Tuomala, Matti, 2010. "Trends in top income shares in Finland 1966-2007," Research Reports 157, VATT Institute for Economic Research.
  • Handle: RePEc:fer:resrep:157
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    File URL: https://www.doria.fi/handle/10024/148696
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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. 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.
    2. Lehmus, Markku, 2014. "Distributional and employment effects of labour tax changes in Finland," Journal of Policy Modeling, Elsevier, vol. 36(1), pages 107-120.
    3. 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.
    4. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, University of Tampere, School of Management, Economics.

    More about this item

    Keywords

    Top income shares; inequality; taxation; income mobility; Income distribution; Tulonjako; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot;

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