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What Determines Top Income Shares? Evidence from the Twentieth Century

Listed author(s):
  • Roine, Jesper

    ()

    (SITE)

  • Vlachos, Jonas

    ()

    (Department of Economics, Stockholm University)

  • Waldenström, Daniel

    ()

    (IFN)

This paper examines the long-run determinants of the evolution of top in-come shares. Using a newly assembled panel of 16 developed countries over the entire twentieth century, we find that financial development dis-proportionately boosts top incomes. This effect appears to be particularly strong during the early stages of a country’s development. Economic growth is strongly pro-rich which is inconsistent with globalized labor markets determining the incomes of elites. Furthermore, international trade is not associated with increases in top incomes on average, but is so in An-glo-Saxon countries. Finally, tax progressivity has a significant negative ef-fect on top income shares whereas government spending has no such clear impact on inequality.

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File URL: http://swopec.hhs.se/hastef/papers/hastef0676.pdf
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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 676.

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Length: 39 pages
Date of creation: 29 Sep 2007
Handle: RePEc:hhs:hastef:0676
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