Earnings dynamics of immigrants and natives in Sweden 1985–2016

Benjamin Friedrich*, Lisa Laun, Costas Meghir

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

This paper analyzes earnings inequality and earnings dynamics in Sweden over 1985–2016. The deep recession in the early 1990s marks a historic turning point with a massive increase in earnings inequality and earnings volatility, and the impact of the recession and the recovery from it lasted for decades. In the aftermath of the recession, we find steady growth in real earnings across the entire distribution for men and women and decreasing inequality over more than 20 years. Despite the positive trend, large gender differences in earnings dynamics persist. While earnings growth for men is more closely tied to the business cycle, women face much higher volatility overall. Earnings volatility is also substantially higher among foreign-born workers, reflecting weaker labor market attachment and high risk of large negative shocks for low-income immigrants. We document an important role of social benefits usage for the overall trends and for differences across subpopulations. Higher benefits enrollment, especially for women and immigrants, is associated with higher earnings volatility. As the generosity and usage of benefit programs declined over time, we find stronger earnings growth among low-income workers, consistent with higher self-sufficiency.

Original languageEnglish (US)
Pages (from-to)1803-1847
Number of pages45
JournalQuantitative Economics
Volume13
Issue number4
DOIs
StatePublished - Nov 2022

Keywords

  • D31
  • E24
  • Earnings inequality
  • J15
  • J31
  • J61
  • earnings volatility
  • immigration
  • social insurance

ASJC Scopus subject areas

  • Economics and Econometrics

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