Scandinavian Working Papers in Economics
Research Papers in Economics,
Stockholm University, Department of Economics
No 2007:17: What Determines Top Income Shares? Evidence from the Twentieth Century
Jesper Roine (), Jonas Vlachos () and Daniel Waldenström ()
Additional contact information
Jesper Roine: Stockholm School of Economics, Postal: SITE , Stockholm School of Economics , P.O. Box 6501, SE-11383 Stockholm, Sweden
Jonas Vlachos: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Daniel Waldenström: IFN, Postal: P.O. Box 55665, SE-10215 Stockholm, Sweden
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
39 pages, September 29, 2007
Full text files
wp07_17.pdf
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