Income Inequality in the Netherlands, 1850–1920: a Panel Study

Eva van der Heijden, Utrecht University
Auke Rijpma, Utrecht University
Rick Schouten, Utrecht University
Paul Puschmann, Radboud University Nijmegen

Income inequality is again central to our views of past economies, however, consensus on the drivers of changes in income distributions is still lacking (Alfani 2021). In this paper, we use new local-level estimates of income inequality obtained from detailed Dutch tax data to explore the drivers of income inequality in the Netherlands between 1850 and 1920. In this period the Netherlands experienced rapid structural, technological, and demographic change as industrialization turned many farmers into workers. However, relatively little is known about the income distribution of the Netherlands in this period, as is the case in many other countries (Soltow and Van Zanden 1998; Moatsos et al. 2014). With individual-level income estimates from Dutch municipal tax records, we can push our understanding of long-run inequality before World War I – the starting point of studies relying on national income taxes. Moreover, by using income microdata we present an alternative to wealth taxes or “social tables” (e.g. Lindert and Williamson 1983; 2017; Alfani 2015) and are able to break down aggregate measures while simultaneously including a larger share of the population - i.e., moving beyond the ‘happy few’ in the income distribution. We use this panel to test the theories of modernization, shocks (Scheidel, 2017), factor prices (O'Rourke and Williamson 1999, 2005; see also Milanovic 2016) and Kuznet’s (1955) inverted U-curve as explanations for the changes in the income distribution and economic inequality in the Netherlands. Taking a municipal-comparative approach, our study sheds light on diverging trends in income inequality in Dutch municipalities between 1850 and 1920. Our preliminary findings suggest highly unequal income distributions in Dutch municipalities in the late 19th and early 20th century across both cities and smaller towns, indicating substantial differences between industrializing and rural places in their income dynamics.

No extended abstract or paper available

 Presented in Session 147. Inequality and Well-Being