This paper analyzes earnings inequality and earnings dynamics in Sweden over 1985–2016. The deep recession in the early 1990s marks a historic turning point with a massive increase in earnings inequality and earnings volatility, and the impact of the recession and the recovery from it lasted for decades. In the aftermath of the recession, we find steady growth in real earnings across the entire distribution for men and women and decreasing inequality over more than 20 years. Earnings dynamics differ substantially by gender, education, and origin. Men face lower volatility than women, but their earnings growth is more closely tied to the business cycle. Earnings volatility is also higher among high-educated and foreign-born workers. We document an important role of social benefits usage for the overall trends and for differences across sub-populations. Higher benefits enrollment, especially for women and immigrants, is associated with higher earnings volatility. As the generosity and usage of benefit programs declined over time, we find stronger earnings growth among low-income workers, consistent with higher self-sufficiency.
Authors
- Acknowledgements & Disclosure
- We thank the IFAU for providing the data and supporting the project. We thank the organizers and participants of the conferences for the Global Income Dynamics Project (GIDD) at the Stanford Institute for Theoretical Economics 2019 and at the Federal Reserve Bank of Minneapolis 2020, as well as seminar participants at IFAU for many helpful comments and discussions. We thank Sergio Salgado and Serdar Ozkan for generously providing the analysis code for the results in Section 3 as part of the harmonized comparison across countries. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w28527
- Published in
- United States of America
