Who benefits from economic growth? An analysis of income micro data over a growth period in Norway 1993-2015

Elisabeth Helgesen, OFS scholarship recipient 2017

Abstract

In this thesis I deal with the relation between economic growth and income inequality to study how a long period with substantial economic growth affect income inequality. I investigate what effect economic growth has had on income inequality through the use of income distributions, and explore how household characteristics can explain the differences uncovered. To perform these analyses I use two different approaches. Firstly, the growth incidence curve and the individual growth incidence curve are calculated to explore the direct effect of economic growth on different parts of the income distribution. Secondly, household characteristics are used to further explore the underlying factors shaping the income distribution. This is accomplished by doing a RIF regression combined with the logic of an Oaxaca-Blinder decomposition to decompose the effects into the composition and the structural effect. The results point the economic growth as having a negative effect on income inequality which has increased. Even though the growth is relatively fairly distributed with an almost equal growth rate for large parts of the distribution, the top 10 percent of the income distribution experienced a higher growth throughout the period. It is this larger growth for the top percentile that leads to the conclusion of increased inequality. Despite of the increased inequality, there is little evidence in the results indicating prolonged poverty. Individuals whom are poor in one year are not necessarily poor in the next year, pointing to a high social mobility.

 

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Published Sep. 1, 2020 2:25 PM - Last modified Sep. 1, 2020 2:25 PM