Still the Lands of Equality? Heterogeneity of Income Composition in the Nordics, 1975–2016

According to standard measures of income inequality, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income , meaning the heterogeneity in individuals’ factor income shares. We show that...

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Bibliographic Details
Published in:The B.E. journal of economic analysis & policy 2022-04, Vol.22 (2), p.221-268
Main Authors: Iacono, Roberto, Palagi, Elisa
Format: Article
Language:English
Subjects:
Change agents
D31
D33
dual income taxation
Equality
Heterogeneity
income composition inequality
Income distribution
Income inequality
Income taxes
Nordic countries
Taxation
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Summary:According to standard measures of income inequality, the Nordic countries rank among the most equal economies in the world. This paper studies whether and how this picture changes when the focus is on inequality of income , meaning the heterogeneity in individuals’ factor income shares. We show that, for all countries, a shift in capital incomes toward the top since the early 1990s causes rising heterogeneity in individuals’ factor income shares. To explain this result, we highlight the role of dual taxation systems. For Denmark in 2009–2013, Finland (1990–2007), and Norway (1991–2005), rising capital shares contributed to changes in personal income inequality, while for Sweden our results lead to disregard the capital share as a determinant of increasing income inequality.
ISSN:1935-1682
2194-6108
1935-1682
DOI:10.1515/bejeap-2021-0165