Top Income Shares in the Long Run: An Overview

This paper offers an overview of what we have learned from a collective research project on income distribution in the long run. Using historical income tax statistics and a common methodology, we have constructed annual top income shares series (often broken down by income source) for over 20 countries covering most of the 20th century. One important conclusion is that the decline in income inequality that took place during the first half of the 20th century was mostly accidental, and does not seem to have much to do with a Kuznets-type process. Top capital incomes were hit by major shocks during the 1914-1945 period, and were never able to fully recover from these shocks, probably because of the dynamic impact of progressive income and estate taxation. Our database also allows us to readdress the cross-country analysis of the interplay between inequality and growth with better prospects than with standard databases. (JEL: D31) Copyright (c) 2005 The European Economic Association.