This paper examines the evolution of economic inequality in Sweden before, during and after the major macro-economic recession in the early 1990s. Earnings and income inequality increased after the downturn, but government safety net programs buttressed disposable income for those with low income, and despite the rise in inequality, Sweden remained one of the most egalitarian economies in the world. The rise in inequality raised the return to observable skills, but the returns are still too low to explain that Sweden moved to the top of the league tables in knowledge intensive activities. Our analysis of attitudes to inequality shows that more Swedes expressed more concern over the inequity in inequality after the rise in inequality in the 1990s than in the past. Further, more Swedes expressed greater dissatisfaction with wages and working conditions. On the other hand, the rise in unemployment did not reduce overall subjective well being, probably because individuals adapted to higher levels of unemployment.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14014.
Length: Date of creation: May 2008 Date of revision: Handle: RePEc:nbr:nberwo:14014
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Find related papers by JEL classification: J0 - Labor and Demographic Economics - - General J01 - Labor and Demographic Economics - - General - - - Labor Economics: General J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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