Was it really so high? New estimates on income inequality in Finland, 1865–1959

Previous studies have found very high levels of income inequality in Finland during the late 19th and early 20th centuries [Roikonen, P. (2022). Income inequality in Finland, 1865–2019. Scandinavian Economic History Review, 70(3), 234–251. https://doi.org/10.1080/03585522.2021.1901774; Roikonen, P., & Heikkinen, S. (2020). A Kuznets rise and a Piketty fall: Income inequality in Finland, 1865–1934. European Review of Economic History, 24(1), 46–79.]. These results align with findings from the other Nordic countries. This applies to both Roikonen & Heikkinen [(2020). A Kuznets rise and a Piketty fall: Income inequality in Finland, 1865–1934. European Review of Economic History, 24(1), 46–79.] and Roikonen [(2022). Income inequality in Finland, 1865–2019. Scandinavian Economic History Review, 70(3), 234–251. https://doi.org/10.1080/03585522.2021.1901774]. This study strives to improve their estimations by homogenising the tax unit population with the removal of corporations, by estimating the average income within the top bracket using more realistic assumptions, and by extrapolating the income share of the exempted tax units with an exponential distribution. The top 1 percent's share in 19th century falls significantly in comparison to these previous estimates. The Gini coefficient, however, changed gradually. It is argued that the new estimate of the top 1 percent's share aligns with well-known theses on the development of inequality under industrialisation and urbanisation [Kuznets, S. (1955). Economic growth and income inequality. American Economic Review, 45(1), 1–28; Marx, K. (2024). Capital: Critique of Political Economy, Volume 1 (P. Reitter & P. North, Eds., Transl. Paul Reitter). Princeton University Press. (Original work published 1872); Milanovic, B., Lindert, P. H., & Williamson, J. G. (2011). Pre-industrial inequality. Economic Journal, 121(551), 255–272. https://doi.org/10.1111/j.1468-0297.2010.02403.x]. At the same time, the trends in the Gini coefficient suggests that the changes in overall inequality may have been more muted.