Events at CERGE-EI

Filip Novokmet, Ph.D.

The University of Bonn, Germany

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Author: Filip Novokmet

Abstract: This work analyses the evolution of top income shares in the Czech Lands from the end of the 19th century until today. Top income shares followed a U-shaped evolution in the course of the 20th century. Higher shares in the first half of the 20th century were due to high concentration of capital income at the top of the income distribution. Equally, shocks to top capital incomes were the main force behind the secular fall in top concentration. Communism led to the virtual annihilation of private capital income and the stumbling of top income shares. A sharp decline in the first half of the twentieth century was largely due to a drop in the top percentile share. After residing at very low levels featured by the remarkable stability for several decades, top income shares have increased after the fall of Communism. The transition to the market economy saw a rise in both top labour and top capital incomes. However, in contrast to the pre-communist period, there is a higher prominence of the working rich at the top. This evolution is explained by the continuous interplay of economic and political forces. The Czech Republic is the suggestive example of the critical role played by the interaction between private, public and foreign capital in shaping top income patterns. Except for the socialist period, when the bulk of wealth was in the public ownership, the holders of top capital incomes have disproportionally been foreigners.
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Older version of the paper is available here.