Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 775: Intergenerational Top Income Mobility in Sweden – Capitalist Dynasties in the Land of Equal Opportunity?

Anders Björklund (), Jesper Roine () and Daniel Waldenström ()
Additional contact information
Anders Björklund: Stockholm University, Postal: Swedish Institute for Social Research (SOFI), SE-106 91 Stockholm, Sweden
Jesper Roine: Stockholm School of Economics, Postal: SITE, P.O. 6501, SE-113 83 Stockholm, Sweden
Daniel Waldenström: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm,Sweden

Abstract: This paper presents new evidence on intergenerational mobility in the top of the income and earnings distribution. Using a large dataset of matched father-son pairs in Sweden, we find that intergenerational transmission is very strong in the top, more so for income than for earnings. In the extreme top (top 0.1 percent) income transmission is remarkable with an IG elasticity above 0.9. We also study potential transmission mechanisms and find that sons’ IQ, non-cognitive skills and education are all unlikely channels in explaining this strong transmission. Within the top percentile, increases in fathers’ income are, if anything, negatively associated with these variables. Wealth, on the other hand, has a significantly positive association. Our results suggest that Sweden, known for having relatively high intergenerational mobility in general, is a society where transmission remains strong in the very top of the distribution and that wealth is the most likely channel.

Keywords: Intergenerational income mobility; Top incomes; Earnings inequality; Income inequality; Welfare state; Non-linear regression; Quantile regression

JEL-codes: D31; J62

31 pages, First version: November 3, 2008. Revised: September 27, 2010.

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