Rising Earnings Inequality in Sweden: The Role of Composition and Prices |
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Authors: | David Domeij |
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Affiliation: | 1. Stockholm School of Economics, SE‐113 83 Stockholm, Sweden david.domeij@hhs.se;2. Financial support from the Jan Wallander and Tom Hedelius Foundation is gratefully acknowledged. |
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Abstract: | The rise in cross‐sectional earnings inequality in Sweden between 1990 and 2002 is decomposed into changes in market prices of observable characteristics, changes in the composition of the labor force across demographic groups and industries, and changes in unobservables. The Swedish experience is then compared with that in the United States. In both countries, the rise in earnings inequality is a consequence of rising upper‐tail dispersion. Contrary to the U.S. experience, where the rise is largely driven by changing market prices of observables and increased residual dispersion, shifts in the Swedish labor‐force composition have contributed positively to the rise in the p90–p50 gap. The rise in the Swedish p99–p90 gap, however, is entirely accounted for by changes in prices and residual dispersion. |
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Keywords: | Earnings inequality Sweden United States E24 J31 |
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