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On the Role of Capital Gains in Swedish Income Inequality
SITE, Stockholm School of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2011 (English)Report (Other academic)
Abstract [en]

Realized capital gains are typically disregarded in the study of income inequality. We show that in the case of Sweden this severely underestimates the actual increase in inequality and, in particular, top income shares during recent decades. Using micro panel data to average incomes over longer periods and re-rank individuals according to income excluding capital gains, we show that capital gains indeed are a reoccurring addition to rather than a transitory component in top incomes. Doing the same for lower income groups, however, makes virtually no difference. We also try to find the roots of the recent surge in capital gains-driven inequality in Sweden since the 1980s. While there are no evident changes in terms of who earns these gains (high wage earners vs. top capital income earners), the primary driver instead seems to be the drastic asset price increases on the post-1980 deregulated financial markets.

Place, publisher, year, edition, pages
Uppsala: Department of Economics , 2011. , 29 p.
Series
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975 ; 2011:7
Keyword [en]
Top incomes, Income inequality, Capital gains, Capital income, Sweden
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-153262OAI: oai:DiVA.org:uu-153262DiVA: diva2:415815
Note
Also published in Working paper / Uppsala Center for Fiscal Studies, Uppsala University; 2011:4.Available from: 2011-05-09 Created: 2011-05-09 Last updated: 2011-05-11Bibliographically approved

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