Income Inequality in Norway, 1960-2011

Abstract: Over the last decades, the share of income accruing to upper income groups and the overall inequality has increased in many developed countries. This thesis primary objective has been to analyse whether there is a cointegration between Norwegian top income shares and the inverted Pareto-Lorenz coefficient. If a cointegration relationship is found it means that the top income shares could be used as a proxy of inequality. The secondary objective was to investigate how the top income shares, along with the Gini coefficient evolved during the banking crisis in 1991-1992 and the recent financial crisis. The data used was derived from the World Income Inequality Database v.2 (WIID2) and the regressions cover the time period between 1960 until 2011. The main findings are that the top income shares can be used as a proxy and that the relative inequality in Norway was not affected much by neither the banking crisis, nor the financial crisis. The top income shares were more affected by the tax reform in 1992 and the implementation of a permanent dividend tax in 2006.