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Capital Shares and Income Inequality: Evidence from the Long Run

  • Erik Bengtsson (a1) and Daniel Waldenström (a2)
Abstract

This article studies the long-run relationship between the capital share in national income and top personal income shares. Using a newly constructed historical cross-country database on capital shares and top income data, we find evidence on a strong, positive link that has grown stronger over the past century. The connection is stronger in Anglo-Saxon countries, in the very top of the distribution, when top capital incomes predominate, when using distributed top national income shares, and when considering gross of depreciation capital shares. Out of-sample predictions of top shares using capital shares indicates several cases of over- or underestimation.

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Footnotes
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We have received valuable comments and suggestions from Peter Lindert, Branko Milanovic, Chris Minns, Thomas Piketty, Leandro Prados de la Escosura, the editor, anonymous referees and participants at the SSHA Annual Meeting 2016, 20th FMM Conference in Bonn 2016, and research seminars at Kingston University and University Carlos III. All data, computer programs, and an Online Appendix can be found on the authors’ web pages. Financial support from the Swedish Research Council is gratefully acknowledged.

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References
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Supplementary materials

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Online Appendix

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Online Appendix

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Online Appendix

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Supplementary materials

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Online Results Appendix

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