Working Paper No. 801

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

Published: June 16, 2009, revised March 2010Pages: 31Keywords: Top Incomes; Income Inequality; Economic Development; Common Structural BreaksJEL-codes: C32; D30; N30

Common Trends and Shocks to Top Incomes – A Structural Breaks Approach Jesper Roine and Daniel Waldensntröm


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.

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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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