DP10006 Volatile Top Income Shares in Switzerland? Reassessing the Evolution Between 1981 and 2009

Author(s): Reto Foellmi, Isabel Z. Martínez
Publication Date: June 2014
Keyword(s): Income inequality, Labor income, Pareto interpolation, Switzerland, Tax data, Top income share
JEL(s): C81, D31, H24, N33
Programme Areas: Labour Economics, Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10006

We study the recent evolution of top incomes in Switzerland, analyzing both social security data on labor incomes and tax data on total income. The results show that in the last 20 years, the share of top incomes has risen, and the top 0.01 percent’s share even doubled, putting Switzerland similar to European countries for the top 1 percent group but closer to the U.S. for higher top incomes. However, top incomes also exhibited large variations over the business cycle. Besides documenting the recent evolution of total top incomes, we close the gap in the data between 1993 and 2003, exploiting the fact that the Swiss cantons changed their tax system at different points in time. We compare the results with social security data on top labor incomes for which the top shares can be measured precisely over the whole time span. The comparison suggests that labor incomes have become more important among top income earners in Switzerland. This is in line with findings for other developed countries: especially in the U.S., but also in European countries like Germany or the Netherlands, labor incomes have been playing a major role in top incomes in recent decades.