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The Mystery of Inequality: Essays on Culture, Development, and Distributions

Doctoral Dissertation, Economic Studies 195
Hammar, Olle (2021). The Mystery of Inequality: Essays on Culture, Development, and Distributions. Doctoral Dissertation. Department of Economics, Uppsala University.

Olle Hammar

This thesis consists of four self-contained essays. The papers are primarily empirical, and use a wide variety of data sources ranging from global survey data to administrative records.

Essay I (with Daniel Waldenström): We estimate trends in global earnings dispersion across occupational groups by constructing a new database that covers 68 developed and developing countries between 1970 and 2018. Our main finding is that global earnings inequality has fallen, primarily during the 2000s and 2010s, when the global Gini coefficient dropped by 15 points and the earnings share of the world’s poorest half doubled. Decomposition analyses show earnings convergence between countries and within occupations, while within-country earnings inequality has increased. Moreover, the falling global inequality trend was driven mainly by real wage growth, rather than changes in hours worked, taxes or occupational employment.

Essay II: I analyze the relationship between individualism and preferences for redistribution, using variation in immigrants’ countries of origin to capture the impact of cultural values and beliefs on personal attitudes towards income redistribution and equality. Using global individual-level survey data, I find strong support for the hypothesis that more individualistic cultures are associated with lower preferences for redistribution. At the same time, cultural assimilation in this dimension seems to take place relatively fast.

Essay III (with Paula Roth and Daniel Waldenström): We provide new evidence on income inequality levels and trends in Sweden from 1968 to 2016. By combining data from tax and population registers, we construct a new dataset that includes the distribution of pre-tax total and post-tax disposable income for the full Swedish population since 1968. Our results indicate that the 1980s was the decade with the lowest level of overall income inequality in Sweden, while income inequality as measured by top income shares for the very top has increased steadily over the studied period. 

Essay IV (with Katarzyna Burzynska): We apply a panel of 331 microfinance institutions from 37 countries to investigate the relationship between social beliefs and microfinance financial performance over the period of 2003–2011. We find that microfinance institutions in countries with higher levels of trust and more collectivist culture have lower operating and default costs and charge lower interest rates. These results provide the first large cross-country evidence that social beliefs are important determinants of microfinance performance.

Olle Hammar

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