Incomes and income inequality in Stockholm, 1870–1970: Evidence from micro data

Abstract

This paper analyzes incomes and income inequality in Stockholm from 1870 to 1970. The paper builds on a new dataset of 38,022 randomly sampled Stockholm residents 1870–1950, with information on income, occupation, age, gender, and household composition. This is complemented by the Census of 1930 and a Statistics Sweden sample for 1960 and 1970. Incomes were very unequally distributed between 1870 and 1920, with Gini coefficients of pre-tax income around sixty. After 1920 inequality fell quite steadily. A drop in capital incomes contributed, and when looking at post-tax incomes the growth of progressive taxation after 1930 also contributed, but most of the high inequality up to 1920 and equalization after this date depended on the distribution of labour income. In the early 1900s professional groups had huge income advantages over workers, but this advantage was drastically reduced after 1920 when working-class incomes grew rapidly. An important mechanism of income growth was the upgrading of the jobs structure, highlighting the importance of structural change, beyond the Kuznetsian binary of agriculture–manufacturing, for understanding long-run economic inequality.