Capital income is known to increase income inequality when measured on an annual basis, but the role of personal capital income in long-run inequality is rarely studied. Theoretically, capital income can increase or decrease long-term inequality depending on the correlation with other income.
We examine, using Swedish register data, the evolution of annual and long-term income inequality in Sweden 1991–2021, using disposable income with and without capital income. Capital income had a marginally equalizing effect on long-term inequality for the period 1991 to 2006 but added substantially to long-term inequality for the period 2007 to 2021. To fully understand the distributional effects of capital income, a long-term perspective is needed.
