Intergenerational income inequality and dynastic poverty persistence: Germany and the United States compared

Abstract

Purpose: Using GSOEP-PSID the study analyzes the effects of redistribution policy on intergenerational income inequality, poverty intensity, intergenerational income mobility, and dynastic poverty persistence in Germany and the United States. Methodology: To evaluate the extent and the intensity of dynastic inequality and poverty the paper employs inequality measures and poverty indices. The contribution of a set of human capital and labor market variables on intergenerational income mobility and the risk of dynastic poverty persistence is analyzed with linear and nonlinear regression approaches and a binomial logit model. Findings: The empirical results partly corroborate that countries with a forced redistribution scheme succeed in reducing income inequality and poverty intensity, but at the expense of intergenerational income persistence and the relative risk of dynastic poverty persistence. In Germany, redistribution policy reduces income inequality and poverty intensity to a greater extent than in the United States, and the equalizing effect of public transfers increases with age. In the United States intergenerational income persistence and the relative risk of dynastic poverty persistence are more pronounced than in Germany. The contribution of gender, educational attainment, and labor market engagement to the intergenerational income mobility and the relative risk of dynastic poverty persistence is country specific and differ by age group. Research implications: The results call for further research of the interaction of family-life, labor market settings, and social policy in determining the degree of intergenerational income mobility and dynastic poverty persistence.