Equality before the welfare state : the Norwegian income distribution 1892-1929

Abstract

We estimate the complete income distribution in Norway for 1892, 1906, 1913 and 1929. Compared to previous research, we benefit from better data and more advanced estimation techniques. Our thesis identifies several data weaknesses which have caused bias in previous studies. Much of the data previously used does not distinguish between individual taxpayers and impersonal entities such as stock companies and banks. Another weakness is that before 1921, dividends were not included in the income data. For 1929, the data allows us to create local-level estimates for each Norwegian municipality. We find that the pre-tax, pre-transfers Gini index is stable for the years we analyse, starting at 52 percent in 1892 and ending at 54 percent in 1929. The top 1% income share before taxes and transfers falls over time, declining from 19 percent in 1892 to 12 percent in 1929. We find that shocks to wealth might play a role in this development. Our results differ significantly from those of previous studies. First, we find a Gini index lower than Aaberge, Atkinson and Modalsli (2016). Second, we find lower top incomes and a different development over time than Aaberge, Atkinson and Modalsli (2013). Our results suggest that Norway was already among the most egalitarian countries in Western Europe between 1892 and 1929 in terms of income. However, our estimates are sensitive to total income and to the estimation of stock dividends. Historical estimates from other countries are likely to be sensitive too, leaving a considerable risk of error when comparing.