The Dynamics of Income Concentration over the Twentieth Century: The Case of Advanced Countries

FACUNDO ALVAREDO; THOMAS PIKETTY

UNDP-Poverty Reduction DP

United Nations Development Program

Lugar: New York; Año: 2010 p. 1 - 24

1562-6865

This paper offers an overview of the main findings of a collective research project on income distribution in the long run in advanced countries. The decline in income concentration that took place during the first half of the twentieth century was mostly accidental, and does not seem to have much connection with a Kuznets-type process. Top capital incomes were hit by major shocks between 1914 and 1945, and were never able to fully recover. We argue that the introduction of progressive income and estate taxation during the second half of the twentieth century played a key role in the non-recovery phenomenon. The last thirty years tell a different story. In continental Europe there was a period of falling shares in the 1960s and 1970s followed by a relative stability over the last twenty years. On the contrary, English-speaking countries have displayed a remarkable convergence up to the 1970s to the bottom of a long-run U-shape, followed by a substantial increase in top shares since the 1980s, mainly driven by large increases in top wages.