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Capital Shares and Income Inequality: Evidence from the Long Run

Bengtsson, Erik LU and Waldenström, Daniel (2016) In European Historical Economics Society Working Paper Series
Abstract
This paper investigates the relationship between the capital share in national income and personal income inequality over the long run. Using a new historical cross-country database on capital shares in 19 countries and data from the World Wealth and Income Database, we find strong long-run links between the aggregate role of capital in the economy and the size distribution of income. Over time, this dependence varies; it was strong both before the Second World War and in the early interwar era, but has grown to its highest levels in the period since 1980. The correlation is particularly strong in Anglo-Saxon and Nordic countries, in the very top of the distribution and when we only consider top capital incomes. Replacing top income shares... (More)
This paper investigates the relationship between the capital share in national income and personal income inequality over the long run. Using a new historical cross-country database on capital shares in 19 countries and data from the World Wealth and Income Database, we find strong long-run links between the aggregate role of capital in the economy and the size distribution of income. Over time, this dependence varies; it was strong both before the Second World War and in the early interwar era, but has grown to its highest levels in the period since 1980. The correlation is particularly strong in Anglo-Saxon and Nordic countries, in the very top of the distribution and when we only consider top capital incomes. Replacing top income shares with a broader measure of inequality (Gini coefficient), the positive relationship remains but becomes somewhat weaker. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
Wage share, Top incomes, Inequality, Wealth, Economic history
in
European Historical Economics Society Working Paper Series
issue
92
pages
67 pages
publisher
European Historical Economics Society
language
English
LU publication?
yes
id
5f94ce8c-fda7-44ab-b45e-16800c32c776 (old id 8619166)
alternative location
http://ehes.org/EHES_92.pdf
date added to LUP
2016-02-11 13:39:05
date last changed
2016-04-16 09:12:14
@misc{5f94ce8c-fda7-44ab-b45e-16800c32c776,
  abstract     = {This paper investigates the relationship between the capital share in national income and personal income inequality over the long run. Using a new historical cross-country database on capital shares in 19 countries and data from the World Wealth and Income Database, we find strong long-run links between the aggregate role of capital in the economy and the size distribution of income. Over time, this dependence varies; it was strong both before the Second World War and in the early interwar era, but has grown to its highest levels in the period since 1980. The correlation is particularly strong in Anglo-Saxon and Nordic countries, in the very top of the distribution and when we only consider top capital incomes. Replacing top income shares with a broader measure of inequality (Gini coefficient), the positive relationship remains but becomes somewhat weaker.},
  author       = {Bengtsson, Erik and Waldenström, Daniel},
  keyword      = {Wage share,Top incomes,Inequality,Wealth,Economic history},
  language     = {eng},
  number       = {92},
  pages        = {67},
  publisher    = {ARRAY(0xcf0f460)},
  series       = {European Historical Economics Society Working Paper Series},
  title        = {Capital Shares and Income Inequality: Evidence from the Long Run},
  year         = {2016},
}