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What Determines Top Income Shares? Evidence from the Twentieth Century

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This paper examines the long-run determinants of the evolution of top income shares. Using a newly assembled panel of 16 developed countries over the entire twentieth century, we find that financial development disproportionately 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 Anglo-Saxon countries. Finally, tax progressivity has a significant negative effect on top income shares whereas government spending has no such clear impact on inequality.

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File URL: http://www2.ne.su.se/paper/wp07_17.pdf
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2007:17.

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Length: 39 pages
Date of creation: 29 Sep 2007
Handle: RePEc:hhs:sunrpe:2007_0017
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Department of Economics, Stockholm, S-106 91 Stockholm, Sweden

Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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