What Determines Top Income Shares? Evidence from the Twentieth Century

39 Pages Posted: 2 Oct 2007

See all articles by Jesper Roine

Jesper Roine

Stockholm School of Economics - Department of Economics

Jonas Vlachos

Stockholm University - Department of Economics; Research Institute of Industrial Economics (IFN)

Daniel Waldenström

Research Institute of Industrial Economics

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

JEL Classification: F10, G10, D31, N30

Suggested Citation

Roine, Jesper and Vlachos, Jonas and Waldenstrom, Daniel, What Determines Top Income Shares? Evidence from the Twentieth Century. Research Institute of Industrial Economics (IFN), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1018332

Jesper Roine

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46-8-7369000 (Phone)

Jonas Vlachos

Stockholm University - Department of Economics ( email )

Stockholm, 10691
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Daniel Waldenstrom (Contact Author)

Research Institute of Industrial Economics ( email )

P.O. Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/danielw

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