Wealth-Income Ratios in a Small, Late-Industrializing, Welfare-State Economy - Sweden, 1810–2010

How do wealth-income ratios evolve over time and what are its main determinants? The study underlying the lecture presents a new database on the Swedish national wealth and examines the evolution of wealth-income ratios over the past two centuries. In contrast to the large economies France, Germany, the U.K. and the U.S. studied by Piketty and Zucman (2014) and Piketty (2014), Sweden is a small, open economy, was relatively late to industrialize and during the 20th century it developed probably the most extensive welfare state in the world. The study examines how these differences can account for differences across countries in both level and time trend in the wealth-income ratios as well as their composition in terms of private-public assets, the importance of business equity or the role of capital imports during industrialization. Furthermore it is found that lower Swedish private savings rates accounts for much of the smaller role of domestic wealth during the agrarian era whereas asset price increases seem to dominate in the modern era. The study also investigates the recent critique of the Piketty framework forwarded by Per Krusell and Tony Smith (Krusell and Smith, 2014) on the use of gross versus net savings rates on the long-run steady state levels of wealth-income ratios.