The Effect of Macroeconomic Variables on the Distribution of Income: The Case of Switzerland

Abstract

This paper seeks to analyze how business cycle variations affect the distribution of income in Switzerland. The data used in the study are taken from the Swiss federal personal income tax statistics for 1951-1986. The results of our analysis show that productivity gains tend to improve the relative income share of the poor. It appears also that inflation acts like a progressive tax in Switzerland. Finally, our study emphasizes that macro economic downswings decrease income inequality in Switzerland, and this result can be explained by the very selective and restrictive Swiss immigration policy.