SSE/EFI Working Paper Series in Economics and Finance
No 639:
Rising Earnings Inequality in Sweden: The Role of Composition and Prices
David Domeij ()
Abstract: This paper decomposes the rise in cross-sectional earnings
inequality in Sweden between 1990 and 2002 into changes in market prices of
observable characteristics, changes in the composition of the labor force
across demographic groups and industries, and changes in unobservables, and
compares the Swedish experience with that in the U.S. The rise in earnings
inequality is in both countries a consequence of rising upper tail
dispersion. Contrary to the U.S. experience, where the rise is largely
driven by changing market prices of observables and increased residual
dispersion, shifts in the Swedish labor force composition have contributed
positively to the rise in the P90-P50 gap. The rise in the Swedish P99-P90
gap is however entirely accounted for by changes in prices and residual
dispersion.
Keywords: Earnings; inequality; Sweden; United States; (follow links to similar papers)
JEL-Codes: E24; J31; (follow links to similar papers)
30 pages, October 3, 2006
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