Research Papers in Economics, Department of Economics, Stockholm University
What Determines Top Income Shares? Evidence from the Twentieth Century
(), Jonas Vlachos
() and Daniel Waldenström
Abstract: This paper examines the long-run determinants of the
evolution of top income shares. Using a newly assembled panel of 16
developed countries over the entire twentieth century, we find that
financial development disproportionately boosts top incomes. This effect
appears to be particularly strong during the early stages of a country’s
development. Economic growth is strongly pro-rich which is inconsistent
with globalized labor markets determining the incomes of elites.
Furthermore, international trade is not associated with increases in top
incomes on average, but is so in Anglo-Saxon countries. Finally, tax
progressivity has a significant negative effect on top income shares
whereas government spending has no such clear impact on inequality.
Keywords: Top incomes; income inequality; financial development; trade openness; government spending; economic development; (follow links to similar papers)
JEL-Codes: D31; F10; G10; N30; (follow links to similar papers)
39 pages, September 29, 2007
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