2006–2010

The Long-run Determinants of Inequality: What Can We Learn from Top Income Data?

Reprint No. 2009:23

Author(s): Jesper Roine, Jonas Vlachos and Daniel WaldenströmYear: 2009 Title: Journal of Public Economics Volume (No.): 93 (7-8) Pages: 974–988
Online article (restrictions may apply)


This paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century. We focus on three groups of income earners: the rich (P99–100), the upper middle class (P90–99), and the rest of the population (P0–90). The results show that periods of high economic growth disproportionately increases the top percentile income share at the expense of the rest of the top decile. Financial development is also pro-rich and the outbreak of banking crises is associated with reduced income shares of the rich. Trade openness has no clear distributional impact (if anything openness reduces top shares). Government spending, however, is negative for the upper middle class and positive for the nine lowest deciles but does not seem to affect the rich. Finally, tax progressivity reduces top income shares and when accounting for real dynamic effects the impact can be important over time.


Reference:
Roine, Jesper, Jonas Vlachos and Daniel Waldenström (2009), "The Long-run Determinants of Inequality: What Can We Learn from Top Income Data?". Journal of Public Economics 93(7-8), 974–988.

Daniel Waldenström

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Jonas Vlachos

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Mob: +46 70 893 3240
jonas.vlachos@ne.su.se

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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