Industrial shift, skill mismatch and income inequality: A decomposition analysis of changing distributions in the Oslo region

This paper examines changing income inequality in the Oslo region between 1993 and 2000. Adopting a decomposition approach, the analysis reveals that both earnings inequality and post-tax inequality remained stable across educational groups, a finding that contradicts skill mismatch theory. Arguments relating to industrial shift turn out as more relevant: there is a clear dispersion of earnings and a substantial dispersion of post-tax income in certain industries, specifically producer services, high-tech distribution and, more ambiguously, high-tech manufacturing. The change is concentrated at the top end of the distribution and appears to reflect a combination of unbalanced growth, labour market environments and tax policy. It is suggested that Oslo during the transformation to a post-industrial economy is increasingly departing from Norwegian egalitarianism.