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This report was prepared for the Swedish Fiscal Policy Council while both authors (Annette Alstadsæter and Jesper Roine) were council members.
It was published as the Special Report No. 1/2024: “Economic inequality in Sweden - An overview of facts and future challenges”. The report is included in the Skatteforsk Notes Series with the permission of the Fiscal Policy Council.
This report looks at the development of economic inequality in Swedenand seeks to explain is and isn't known, as well as what could be done to improve the situation.
The report clarifies 1) what has happened (according to the data and measures typically used), 2) why there are still some different perspectives on how to interpret what is seen in the data, and 3) what would be needed to straighten out the remaining question marks. This is done by starting with clarifying the definitions of what is meant by economic inequality and how it relates to income (Chapter 2). Then, various challenges in measuring income and wealth and how the availability of data limits our knowledge about inequality are discussed (Chapter 3). Afterwards, the authors present a summary of what is known about the overall inequality development in Sweden since the 1990s as it appears when studying available data (Chapter 4). Finally, the report lays out which dimensions remain contested as well as unknown due to lack of available data and how this impacts the public debate (Chapter 5). The last chapter also presents arguments about why there are reasons to think that missing data is of increasing importance to the overall picture.
The report's overall conclusion is that inequality in terms of disposable incomes has increased since the 1990s. The dispersion over the whole period happens across the full distribution; all income groups have experienced real income gains, but the gains are larger the higher up in the distribution (and much higher in the very top of the distribution). However, looking at the more recent period, after the financial crises, income growth is very evenly distributed across most of the population. Only the very top groups continue to do much better than the rest of the population. Decomposing the change across different income components suggest that most of the increased inequality comes from the capital income component.
The fact that underlying data is based on tax records creates some uncertainty about how big this increase has been in real terms, but, more importantly, the lack of data on net wealth and corporate shareholders makes it difficult to correctly assess the overall development of economic inequality. This is important both conceptually and quantitatively since both the value of assets and debt have increased over time. Knowing the distribution of these values is important for many policy issues, from welfare assessments to economic stability. Another important aspect from a policy point of view is to recognize that the increased inequality does not come from wage inequality. On the contrary, the distribution of labour earnings has become more equal over the past decades.