THE DISTRIBUTION OF EARNINGS IN FINLAND 1971-1990

We document the distribution and changes in the distribution of earnin gs in Finland from 1971 to 1990, using a large representative set of d ata, collected from the population censuses. Earnings inequality dropp ed dramatically between 1971 and 1975, and continued to decrease until 1985. From 1985 to 1990 there was a substantial increase in the inequ ality of earnings, comparable in magnitude to that found in the U.K an d U.S. While earlier shifts in the inequality of earnings could be acc ounted for by changes in observed characteristics, the large increase at the end of the 1980s occurs almost completely in the dispersion of earnings within cells of observationally equivalent wage earners. Afte r considering and discarding a number of possible explanations for the changes, we find that changes in labour market institutions are consi stent with the observed changes on the inequality of earnings. (C) 199 7 Elsevier Science B.V.