Must capital income increase long-term inequality? Evidence from Sweden 1991-2021

Authors

• Andreas Bergh Lund university
• Martin Nordin Lund university

DOI:

https://doi.org/10.33358/jfea.163691

Keywords:

Income distribution, capital income, inequality, register data

Abstract

Capital income is known to increase income inequality when measured on an annual basis, but the role of personal capital income in long-run inequality is rarely studied. Theoretically, capital income can increase or decrease long-term inequality depending on the correlation with other income. We examine, using Swedish register data, the evolution of annual and long-term income inequality in Sweden 1991-2021, using disposable income with and without capital income. Capital income had a marginally equalizing effect on long-term inequality for the period 1991 to 2006, but added substantially to long-term inequality for the period 2007 to 2021. To fully understand the distributional effects of capital income, a long-term perspective is needed.