Inequality in Iceland
by Stefán Ólafsson and Arnaldur Sölvi Kristjánsson
This book is about inequality of income and wealth in Iceland, covering the period from 1927 to the present. It shows that inequality was quite pronounced before the Second World War. From the 1940s onward, the distribution of both income and wealth became much more equal. For about half a century, Iceland, along with the other Nordic countries, probably had the world’s highest level of equality.
This age of equality was a period of extensive economic growth, rapid modernization of society and the economy, improved standards of living and the build-up of a Nordic-style welfare state. In fact, Iceland can be branded one of the economic and social “miracles” of the post-war period.
As a consequence of this new political and financial environment, the financial incomes increased rapidly from the late 1990s to 2007. Since financial incomes flowed primarily to the top income groups, particularly the top ten percent, the level of income inequality increased. With the added impact of a shifted tax burden from higher to lower and middle incomes, the forces driving increased inequality were fully liberated. The result was a greater increase in income inequality than previously seen in any other Western country since the mid-1900s.
The financial collapse of 2008 then reversed this development, and Iceland once again moved towards more equality, but ending at a somewhat higher level of inequality than had prevailed before the year 2000. The last three years have seen signs of a renewed shift to increased inequality.
This is a saga of extensive shifts, back and forth, between equality and inequality. The authors provide extensive international comparisons of top-income shares and other measures of income and wealth distributions, including data from Thomas Piketty and Anthony B. Atkinson and their colleagues, the OECD and Eurostat. The long-term patterns of inequality in Iceland are broadly comparable to those most commonly found in other Western countries, but the extent of the shifts involved was largest in Iceland. The period from 1992 to 2015 is extensively analysed and various drivers of equality and inequality are assessed and weighted using advanced statistical methods.
The data on inequality developments is analyzed in the context of the modernization of Icelandic society, economic and political developments, class structure, poverty, gender divisions, taxation and labour market developments, and in the light of the evolving Icelandic welfare state.
Inequality in Iceland is a book about the fundamental forces that shaped Icelandic society from the early 20th century to the early 21st century, politics and the evolving standards of living of the population.
Keywords: inequality, income, wealth, comparison, explanations.