Suomen Akatemia VALTA-OHJELMAN HANKKEIDEN TULOKSET

suggest that the decline in income progressivity since the mid 1990s is a central factor explaining
the increase of top income shares in Finland.
Marja Riihelä–Risto Sullström–Matti Tuomala (2010)Trends in Top Income Shares in
Finland 1966–2007 VATT Research Reports 157
This paper provides new evidence about the evolution of top incomes in Finland over the period
1966–2007. Using micro data we construct estimates of shares of top income groups. The paper
shows how the proportion of income earned by the very richest one per cent has changed over time.
It shows a U-shaped pattern over this period. The total share of the highest earners fell consistently
between the mid 1960s and the beginning of the 1990s but then began to rise. The results bring out
clearly how the major equalization from the mid 1960s to the mid 1990s has been reversed, taking
the shares of top income groups back to levels of inequality or even higher found 40 years ago. The
main factor that has driven up the top one per cent income share in Finland after the mid 1990s is in
an unprecedented increase in the fraction of capital income which is in 2007 62 per cent of incomes
in the top one per cent group. In 1990 this fraction was 14 per cent. Therefore the composition of
high incomes at the end of period considered is very different from those earlier years of this period.
We argue in this paper that the 1993 tax reform is one of the key factors responsible for this trend.
Our results suggest that the decline in income progressivity since the mid 1990s is a central factor
explaining the increase of top income shares in Finland.
Potential Determinants of Top Income Inequality Saikat Sakar & Matti Tuomala , Tampere
Economic Working Papers Net Series no77
Using the data series produced from the collective research project on the dynamics of income
distribution (Atkinson and Piketty 2007, 2010) we have studied the effect of different economic
factors on top income inequality in five Anglo-Saxon countries (Australia, Canada, New Zealand,
UK, USA). These effects turn out to be different for individual countries. The bubbles of financial
market explain the surge in top income inequality in the United States. Our results reveal that the
bubbles of financial market increase top income inequality, although the economic growth rate fails
to increase top income shares in the United States. The effect of economic growth rate on top
income inequality is also time varying in the Anglo Saxon region. The positive economic growth
rate of post 1980 turns out to be pro rich but the economic growth rate of pre 1980 does not promote
the top income inequality. The top marginal tax rate and government expenditure may have an
equalizing effect by reducing income of the rich, though the impact of financial development on top
income inequality is inconclusive.