Income inequality in Finland, 1865–2019

Abstract

ABSTRACT This study contributes to long-run inequality discussions by presenting a new series of Finnish income inequality statistics for the years 1865–2019. It shows that income inequality rose and peaked during the industrialisation phase at the turn of the nineteenth and twentieth centuries. Overall, top income shares decreased during the first part of the twentieth century, mainly as a result of shocks to capital (e.g. civil war, WWI & WWII) and rising taxation. After 1948, income inequality rebounded slightly until the advent of the welfare state in the mid-1960s. The role of redistribution through taxes and transfers strengthened and inequality decreased considerably until the late 1980s. During the 1990s, however, income inequality significantly increased, which was driven by capital incomes in the top income groups. Moreover, top income taxes started to diminish already in the late 1970s, and a great taxation reform was enacted in the 1990s, which partly explains the growing income inequality. In contrast, income inequality has remained at relatively similar levels in the twenty-first century.