Common Trends and Shocks to Top Incomes - A Structural Breaks Approach

Posted: 14 Jul 2009 Last revised: 18 Mar 2010

See all articles by Jesper Roine

Jesper Roine

Stockholm School of Economics

Daniel Waldenström

Research Institute of Industrial Economics

Date Written: March 6, 2010

Abstract

We use newly compiled top income share data and structural breaks techniques to estimate common trends and breaks in inequality across countries over the twentieth century. Our results both confirm earlier findings and offer new insights. In particular, the division into an Anglo-Saxon and a Continental European experience is not as clear cut as previously suggested. Some Continental European countries seem to have experienced increases in top income shares, just as Anglo-Saxon countries, but typically with a lag. Most notably, Nordic countries display a marked “Anglo-Saxon” pattern, with sharply increased top income shares especially when including realized capital gains. Our results help inform theories about the causes of the recent rise in inequality.

Keywords: Top incomes,income inequality,economic development,common structural breaks

JEL Classification: C32, D30, N30

Suggested Citation

Roine, Jesper and Waldenstrom, Daniel, Common Trends and Shocks to Top Incomes - A Structural Breaks Approach (March 6, 2010). Review of Economics and Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1425414

Jesper Roine

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
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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