Capital Goods for the Common Good : The Capital-to-income Ratio's connection to Income Inequality in Sweden

Sammanfattning: This thesis utilises the second fundamental law of capitalism in order to study the development of income inequality in Sweden, from the start of the 19th century to the beginning of the 21stcentury. The law is studied from a historical perspective (examination of national accounts as time series), and empirically analysed (regression analysis). The results retrieved indicate that the income diverging force of savings exceed the income converging force of growth (via income, innovation, and education). This means that income inequality is predicted to increase. The main conclusion drawn is that choosing whether to save or not on behalf of every individual affects the capital stock of the aggregate economy. When individual savings pile up the aggregate capital stock increases, and if this increase surpasses the growth in national income the capital-to-income ratio increases. This ratio is in a sense a measure of how capitalistic the country is. More income inequality is expected to be found the higher this ratio gets.