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Long run trends in the distribution of income and wealth

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Abstract

This paper reviews the long run developments in the distribution of personal income and wealth. It also discusses suggested explanations for the observed patterns. We try to answer questions such as: What do we know, and how do we know, about the distribution of income and wealth over time? Are there common trends across countries or over the path of development? How do the facts relate to proposed theories about changes in inequality? We present the main inequality trends, in some cases starting as early as in the late eighteenth century, combining previous research with recent findings in the so-called top income literature and new evidence on wealth concentration. The picture that emerges shows that inequality was historically high almost everywhere at the beginning of the twentieth century. In some countries this situation was preceded by increasing concentration, but in most cases inequality seems to have been relatively constant at a high level in the nineteenth century. Over the twentieth century inequality decreased almost everywhere for the first 80 years, largely due to decreasing wealth concentration and decreasing capital incomes in the top of the distribution. Thereafter trends are more divergent across countries and also different across income and wealth distributions. Econometric evidence over the long run suggests that top shares increase in periods of above average growth while democracy and high marginal tax rates are associated with lower top shares.

Suggested Citation

  • Roine, Jesper & Waldenström, Daniel, 2014. "Long run trends in the distribution of income and wealth," SITE Working Paper Series 26, Stockholm School of Economics, Stockholm Institute of Transition Economics.
  • Handle: RePEc:hhs:hasite:0026
    Note: Prepared as a chapter in: Atkinson, A.B., Bourguignon, F. (Eds.), Handbook of Income Distribution, vol. 2, North-Holland, Amsterdam, forthcoming
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    Cited by:

    1. Judge, George G. & Villas-Boas, Sofia B. & Fu, Quizi, 2017. "An Entropy Based Analysis Of European Micro Income Distributions And Inequality Measures," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2sr9g4n8, Department of Agricultural & Resource Economics, UC Berkeley.
    2. repec:eee:phsmap:v:514:y:2019:i:c:p:686-698 is not listed on IDEAS
    3. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.
    4. Elinder, Mikael & Erixson, Oscar & Waldenström, Daniel, 2018. "Inheritance and wealth inequality: Evidence from population registers," Journal of Public Economics, Elsevier, vol. 165(C), pages 17-30.
    5. Looney, Adam & Moore, Kevin B., 2015. "Changes in the Distribution of After-Tax Wealth: Has Income Tax Policy Increased Wealth Inequality?," Finance and Economics Discussion Series 2015-58, Board of Governors of the Federal Reserve System (US).
    6. Livio Di Matteo, 2016. "Wealth Distribution and the Canadian Middle Class: Historical Evidence and Policy Implications," Canadian Public Policy, University of Toronto Press, vol. 42(2), pages 132-151, June.
    7. Villas-Boas, Sofia B & Fu, Jenny & Judge, George, 2016. "Measuring The Inequality Nature Of European Micro Income Data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6445w1s5, Department of Agricultural & Resource Economics, UC Berkeley.
    8. Stefan Bach, 2016. "Erbschaftsteuer, Vermögensteuer oder Kapitaleinkommensteuer: Wie sollen hohe Vermögen stärker besteuert werden?," Discussion Papers of DIW Berlin 1619, DIW Berlin, German Institute for Economic Research.
    9. Alstadsæter, Annette & Johannesen, Niels & Zucman, Gabriel, 2018. "Who owns the wealth in tax havens? Macro evidence and implications for global inequality," Journal of Public Economics, Elsevier, vol. 162(C), pages 89-100.
    10. Tuominen Elina, 2016. "Top-end inequality and growth: Empirical evidence," Working Papers 1608, University of Tampere, School of Management, Economics.
    11. Munk, Martin D. & Bonke, Jens & Hussain, M. Azhar, 2016. "Intergenerational top income persistence: Denmark half the size of Sweden," Economics Letters, Elsevier, vol. 140(C), pages 31-33.
    12. Tuominen Elina, 2016. "Changes or levels? Reassessment of the relationship between top-end inequality and growth," Working Papers 1609, University of Tampere, School of Management, Economics.
    13. Metzing, Maria & Bartels, Charlotte, 2016. "An integrated approach for top-corrected Ginis," Annual Conference 2016 (Augsburg): Demographic Change 145818, Verein für Socialpolitik / German Economic Association.
    14. Anand, Sudhir & Segal, Paul, 2017. "Who Are the Global Top 1%?," World Development, Elsevier, vol. 95(C), pages 111-126.
    15. repec:wfo:monber:y:2017:i:5:p:425-439 is not listed on IDEAS
    16. repec:wfo:wstudy:60455 is not listed on IDEAS
    17. Andreas Fagereng & Magne Mogstad & Marte Rønning, 2015. "Why do wealthy parents have wealthy children?," Discussion Papers 813, Statistics Norway, Research Department.
    18. Knüpfer, Samuli & Rantapuska, Elias & Sarvimäki, Matti, 2017. "Why does portfolio choice correlate across generations," Research Discussion Papers 25/2017, Bank of Finland.
    19. Tuominen Elina, 2016. "Reversal of the Kuznets curve: Study on the inequality–development relation using top income shares data," Working Papers 1610, University of Tampere, School of Management, Economics.
    20. Pascal Paul, 2018. "Historical Patterns of Inequality and Productivity around Financial Crises," 2018 Meeting Papers 583, Society for Economic Dynamics.
    21. Paul, Pascal, 2017. "Historical Patterns of Inequality and Productivity around Financial Crises," Working Paper Series 2017-23, Federal Reserve Bank of San Francisco.
    22. repec:bla:ehsrev:v:71:y:2018:i:3:p:772-794 is not listed on IDEAS

    More about this item

    Keywords

    Income inequality; Income distribution; Wealth distribution; Economic history; Top incomes; Welfare state; Taxation;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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