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Top incomes in the UK over the 20th century

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Abstract:

Summary. 

Recent changes in the distribution of income need to be placed in historical context. The paper provides new evidence about the evolution of top incomes in the UK over the 20th century. Making use of published tabulations of the income tax statistics, and of microdata for recent years, we construct estimates of the shares of top income groups, giving for the first time an annual time series for gross incomes that spans more than 90 years. The paper pays particular attention to the problems of data construction and of the interpretation of tax-based evidence. The resulting statistics have evident limitations but throw light on periods, such as that between the First and Second World Wars, for which there is little other empirical material. The results bring out clearly how the major equalization of the first three-quarters of the century in the UK has been reversed, taking the shares of the top income groups back to levels of inequality found 50 years ago. A similar U-shaped pattern is found for the USA, but the post-war experience of France is different from that in the UK.

Keywords: Income distribution; Income tax; Interpolation; National income; Pareto distribution; Taxation

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-985X.2005.00351.x

Affiliations: Nuffield College, Oxford, UK

Publication date: March 1, 2005

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