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Common Trends and Shocks to Top Incomes – A Structural Breaks Approach

Author

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  • Roine, Jesper

    () (Stockholm School of Economics)

  • Waldenström, Daniel

    () (Research Institute of Industrial Economics (IFN))

Abstract

In this paper we use newly compiled top income share data to estimate common breaks and trends across countries over the twentieth century. By using the most re-cent structural breaks techniques, our approach both confirms previous notions and offers new insights. In particular, the division into an Anglo-Saxon and a Continental European experience does not seem to be as clear cut as previously suggested. Some continental European countries have had increases in top income shares, just as in the Anglo-Saxon countries, but typically with a lag. Most notably, we find that the Nordic countries display a marked “Anglo-Saxon” pattern, with sharply increased top income shares. Unlike in the Anglo-Saxon countries, however, including realized capital gains seems important in these countries. Our results help inform theories about the causes of the recent rise in inequality.

Suggested Citation

  • Roine, Jesper & Waldenström, Daniel, 2009. "Common Trends and Shocks to Top Incomes – A Structural Breaks Approach," Working Paper Series 801, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0801
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    Cited by:

    1. Leena Kalliovirta & Tuomas Malinen, 2015. "Nonlinearity and cross-country dependence of income inequality," Working Papers 358, ECINEQ, Society for the Study of Economic Inequality.
    2. Waldenström, Daniel, 2015. "Wealth-Income Ratios in a Small, Late-Industrializing, Welfare-State Economy: Sweden, 1810–2014," IZA Discussion Papers 9408, Institute for the Study of Labor (IZA).
    3. Andreas Peichl & Nico Pestel, 2013. "Multidimensional affluence: theory and applications to Germany and the US," Applied Economics, Taylor & Francis Journals, vol. 45(32), pages 4591-4601, November.
    4. Jesper Roine & Daniel Waldenström, 2012. "On The Role Of Capital Gains In Swedish Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(3), pages 569-587, September.
    5. Richard Burkhauser & Markus Hahn & Roger Wilkins, 2015. "Measuring top incomes using tax record data: a cautionary tale from Australia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 181-205, June.
    6. Tuomas Malinen, 2011. "Income Inequality and Savings: A Reassessment of the Relationship in Cointegrated Panels," DEGIT Conference Papers c016_076, DEGIT, Dynamics, Economic Growth, and International Trade.
    7. Kontbay-Busun, Sine & Peichl, Andreas, 2014. "Multidimensional affluence in income and wealth in the eurozone: A cross country comparison using the HFCS," ZEW Discussion Papers 14-124, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Caperoz, Marcelo & Marçal, Emerson Fernandes & Mattos, Enlinson, 2016. "A time series analysis of household income inequality in Brazil 1977-2013," Textos para discussão 434, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    9. Waldenström, Daniel, 2015. "Wealth-income ratios in a small, late-industrializing, welfare-state economy: Sweden, 1810–2014," Working Paper Series, Center for Fiscal Studies 2015:6, Uppsala University, Department of Economics.
    10. Peter Dolton & Li Lin, 2011. "From Grants to Loans and Fees: The Demand for Post-Compulsory Education in England and Wales from 1955 to 2008," CEE Discussion Papers 0127, Centre for the Economics of Education, LSE.
    11. Waldenström, Daniel, 2015. "Wealth-income ratios in a small, late-industrializing, welfare-state economy: Sweden, 1810–2014," Working Paper Series 2015:4, Uppsala University, Department of Economics.
    12. David R. Agrawal & Dirk Foremny, 2018. "Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms," CESifo Working Paper Series 7027, CESifo Group Munich.
    13. van Bavel, Bas, 2016. "The Invisible Hand?: How Market Economies have Emerged and Declined Since AD 500," OUP Catalogue, Oxford University Press, number 9780199608133.
    14. Andreas Peichl & Nico Pestel, 2013. "Multidimensional affluence: theory and applications to Germany and the US," Applied Economics, Taylor & Francis Journals, vol. 45(32), pages 4591-4601, November.
    15. Tuomas, Malinen, 2011. "Inequality and savings: a reassesment of the relationship in cointegrated panels," MPRA Paper 33350, University Library of Munich, Germany.
    16. Waldenström, Daniel, 2015. "Wealth-income ratios in a small, late-industrializing, welfare-state economy: Sweden, 1810–2014," CEPR Discussion Papers 10878, C.E.P.R. Discussion Papers.
    17. Salvatore Morelli & Timothy Smeeding & Jeffrey Thompson, 2014. "Post-1970 Trends in Within-Country Inequality and Poverty: Rich and Middle Income Countries," CSEF Working Papers 356, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    18. Salvatore Morelli, 2014. "Banking Crises in the US: the Response of Top Income Shares in a Historical Perspective," CSEF Working Papers 359, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    19. Tuomas Malinen, 2013. "Is there a relationship between income inequality and credit cycles?," Working Papers 292, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Top Incomes; Income Inequality; Economic Development; Common Structural Breaks;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D30 - Microeconomics - - Distribution - - - General
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative

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