Working Paper Series
Jesper Roine and Daniel Waldenström
The Evolution of Top Incomes in an Egalitarian Society; Sweden, 1903–2004
Abstract: This study presents new homogenous series of top income
shares in Sweden over the period 1903–2004. We find that, starting from
levels of inequality approximately equal to those in other Western
countries at the time, the income share of the Swedish top decile drops
sharply over the first eighty years of the twentieth century. Most of the
decrease takes place before the expansion of the welfare state and by 1950
Swedish top income shares were already lower than in other countries. The
fall is almost entirely due to a dramatic drop in the top percentile
explained mostly by decreases in capital income, while the lower half of
the top decile – consisting mainly of wage earners – experiences virtually
no change over this period. In the past decades top income shares evolve
very differently depending on whether capital gains are included or not.
When included, Sweden’s experience resembles that in the U.S. and the U.K.
with sharp increases in top incomes. Excluding capital gains, Sweden looks
more like the continental European countries where top income shares have
remained relatively constant. A possible interpretation of our results is
that Sweden over the past 20 years has been a country where it is more
important to make the right financial investments than to earn a lot to
Keywords: Income inequality; Income distribution; Wealth distribution; Top incomes; Welfare state; Sweden; Taxation; Capital gains; (follow links to similar papers)
JEL-Codes: D31; H20; J30; N30; (follow links to similar papers)
38 pages, June 21, 2006
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