Income Inequality In Germany Research Articles

Measuring Historical Inequality in Germany

Abstract This article surveys the measurement of historical wealth and income inequality in Germany. We discuss the underlying data sources, the challenges they pose, and the opportunities they create. We also identify two promising avenues for future research. First, we argue that the geographic granularity of German historical statistics provides researchers with the opportunity to investigate the causes of inequality. Second, several dimensions of historical inequality remain under-explored, for example, the equalizing role of welfare state institutions such as public pensions.

Labour market trends and income inequality in Germany, 1983–2020

Labour market trends and income inequality in Germany, 1983–2020

Does inequality migrate? The development of income inequality across German states

AbstractThis study analyzes the evolution of educational and occupational patterns among migrants and natives, as well as income inequality in Germany from 1985 to 2015. We show that despite migrants catching up in education, employment, and income with their native counterparts, unfavorable societal attitudes toward them have remained virtually unchanged, which can be attributed to Bourdieu's conceptualization of cultural inheritance. We find that while income inequality has increased significantly over the 30‐year period, this trend varied considerably by the federal state and that migration did nothing to add to inequality. Since both the German economy and society rely on migrants, there is a strong need for the narratives toward migrants to be based on empirical evidence. The findings of this study hold migrant‐related policy implications not only for Germany but also for other developed nations that rely on migrants as a labor force.

Localising the Upper Tail: How Top Income Corrections Affect Measures of Regional Inequality

Abstract Poor coverage of top incomes in surveys, also referred to as the “missing rich” problem, leads to severe underestimation of income inequality. At the regional level this shortcoming is even more eminent due to small regional sample sizes. Tax records contain more accurate income information at the top and cover all regions equally well. Top-income correction approaches tackle the missing rich problem by imputing top incomes from tax to survey data. While existing methods focus on adjustments at the national level, our paper provides corrections of the regional income distributions in survey data by exploiting the tax data’s regional variability. We impute top incomes in the survey data from the German Microcensus based on region-specific Pareto and generalized Pareto distributions estimated from tax records. The combined survey and tax data provide new estimates of regional income inequality in Germany. Our findings indicate that inequality between and within the regions is much larger than previously understood with the magnitude of the adjustment depending on the federal states’ level of inequality in the tail.

Housing Expenditure and Income Inequality

Abstract The trend of rising income inequality in Germany since the mid-1990s is strongly amplified when considering income after housing expenditure. The income share of housing expenditure rose disproportionally for the bottom income quintile and fell for the top quintile. Factors contributing to these trends include declining relative costs of homeownership versus renting, changes in household structure, declining real incomes for low-income households and residential mobility towards larger cities. Younger cohorts spend more on housing and save less than older cohorts did at the same age, which will affect future wealth accumulation, particularly at the bottom of the income distribution.

Income inequality in Germany stagnating over the long term, but decreasing slightly during the coronavirus pandemic

Income inequality in Germany stagnating over the long term, but decreasing slightly during the coronavirus pandemic

Why Did Income Inequality in Germany Not Increase Further After 2005?

AbstractWhile income inequality in Germany considerably increased in the years before 2005, this trend stopped after 2005. We address the question of what factors were responsible for the break in the inequality trend after 2005. Our analysis suggests that income inequality in Germany did not continue to rise after 2005 for the following reasons. First, we observe that the general rise in wage inequality that explained a lot of the inequality increase before 2005, became less steep (but did not stop) after 2005. Second, despite further increases in wage inequality after 2005, inequality in annual labour incomes did not increase further after 2005 because increased within-year employment opportunities compensated otherwise rising inequality in annual labour incomes. Third, income inequality did not fall in a more marked way after 2005 because also the middle and the upper part of the distribution benefited from the employment boom after 2006. Finally, we provide evidence that the effect of a wide range of other factors that are often suspected to have influenced the distribution such as capital incomes, household structures, population ageing, changes in the tax and transfer system and the financial crisis of 2008 did not significantly alter the distribution after 2005.

Why has Income Inequality in Germany Increased From 2002 to 2011? A Behavioral Microsimulation Decomposition

AbstractThis paper proposes a method to decompose changes in income inequality into the contributions of policy changes, wage rate changes, and population changes while considering labor supply reactions. Using data from the Socio‐Economic Panel (SOEP), this method is applied to decompose the increase in income inequality in Germany from 2002 to 2011, a period that saw tax reductions and a controversial overhaul of the transfer system. The simulations show that tax and transfer reforms have had an inequality‐reducing effect as measured by the mean log deviation and the Gini coefficient. For the Gini, these effects are offset by labor supply reactions. In contrast, policy changes explain part of the increase in the ratio between the 90th and the 50th income percentiles. Changes in wage rates have led to a decrease in income inequality. Thus, the increase in inequality was due to changes in the population.

Correction: Bayesian structured additive distributional regression with an application to regional income inequality in Germany

Correction: Bayesian structured additive distributional regression with an application to regional income inequality in Germany

Why has Income Inequality in Germany Increased from 2002 to 2011? A Behavioral Microsimulation Decomposition

I propose a method to decompose changes in income inequality into the contributions of policy changes, wage rate changes, and population changes while considering labor supply reactions. Using data from the Socio-Economic Panel (SOEP), I apply this method to decompose the increase in income inequality in Germany from 2002 to 2011, a period that saw tax reductions and a controversial overhaul of the transfer system. The simulations show that tax and transfer reforms have had an inequality reducing effect as measured by the Mean Log Deviation and the Gini coefficient. For the Gini, these effects are offset by labor supply reactions. In contrast, policy changes explain part of the increase in the ratio between the 90th and the 50th income percentile. Changes in wage rates have led to a decrease in income inequality. Thus, the increase in inequality was mainly due to changes in the population.

Data on Income inequality in Germany, France, Italy, Spain, the UK, and other affluent nations, 2012.

This data article contains information on the distribution of household incomes in the five most populous European countries as surveyed in 2012, with data released in 2014 and published here aggregated and so further anonymized in 2015. The underlying source data is the already anonymized EU Statistics on Income and Living Conditions (EUSILC) Microdata. The data include the annual household income required in each country to fall within the best-off 1% in that country, median and mean incomes, average (mean) incomes of the best off 1%, 0.1% and estimates for the 0.01%, 0.001% and so on for the UK, and of the 90% and worse-off 10%, the best-off 10% and best-off 1% of households for all countries.Average income from the state is also calculated by these income categories and the number of people working in finance and receiving over €1,000,000 a year in income is reported from other sources (the European Banking Authority). Finally income distribution data is provided from the USA and the rest of Europe in order to allow comparisons to be made. The data revealed the gross household (simple unweighted) median incomes in 2012 to have been (in order from best-off country by median to worse-off): France €39,000, Germany: €33,400, UK: €36,300, Italy €33,400 and Spain €27,000. However the medians, once households are weighted to reflect the nation populations do differ although they are in the same order: France €36,000, Germany: €33,400, UK: €31,300, Italy €31,000 and Spain €23,700. Thus weighting to increase representativeness of the medians reduces each by €3000, €0, €5000, €3300 and €3300 respectively. In short, the middle (weighted median) French household is €4700 a year better off than the middle UK family, and that is before housing costs are considered. This Data in Brief article accompanies Dorling, D. (2015) Income Inequality in the UK: Comparisons with five large Western European countries and the USA [1].

Income Inequality in Germany

Income Inequality in Germany

Bayesian structured additive distributional regression with an application to regional income inequality in Germany

We propose a generic Bayesian framework for inference in distributional regression models in which each parameter of a potentially complex response distribution and not only the mean is related to a structured additive predictor. The latter is composed additively of a variety of different functional effect types such as nonlinear effects, spatial effects, random coefficients, interaction surfaces or other (possibly nonstandard) basis function representations. To enforce specific properties of the functional effects such as smoothness, informative multivariate Gaussian priors are assigned to the basis function coefficients. Inference can then be based on computationally efficient Markov chain Monte Carlo simulation techniques where a generic procedure makes use of distribution-specific iteratively weighted least squares approximations to the full conditionals. The framework of distributional regression encompasses many special cases relevant for treating nonstandard response structures such as highly skewed nonnegative responses, overdispersed and zero-inflated counts or shares including the possibility for zero- and one-inflation. We discuss distributional regression along a study on determinants of labour incomes for full-time working males in Germany with a particular focus on regional differences after the German reunification. Controlling for age, education, work experience and local disparities, we estimate full conditional income distributions allowing us to study various distributional quantities such as moments, quantiles or inequality measures in a consistent manner in one joint model. Detailed guidance on practical aspects of model choice including the selection of several competing distributions for labour incomes and the consideration of different covariate effects on the income distribution complete the distributional regression analysis. We find that next to a lower expected income, full-time working men in East Germany also face a more unequal income distribution than men in the West, ceteris paribus.

Why Has Inequality in Germany Not Risen Further after 2005?

In this paper we explore the reasons for the trend reversal in the development of household market income inequality in Germany in the second half of the 2000s. We analyse to what extent the increasing relevance of capital income as well as the rising share of atypically employed persons have aected the development of income inequality over the last two decades. We use household data from the German Socio-Economic Panel from 1991-2011 and decompose market income into three income sources: (1) household labour income from full-time work, (2) household labour income from atypical work, and (3) household capital income. We apply the factor decomposition method suggested by Shorrocks (1982) to analyse the contribution of these income forms to overall inequality. Our results suggest that changes in the distribution of capital income were a key factor both in the strong increase of inequality in the rst half of the 2000s and in the subsequent trend reversal. This nding contrasts with the reasoning

Explaining Rising Income Inequality in Germany, 1991-2010

In Germany, inequality of net equivalized income increased noticeably in the first half of the new millennium. We aim to identify the main drivers of this rise in income inequality since the early 1990s. We provide a broad overview of the circumstances under which inequality evolved, i.e. which changes in the German economy are most likely to provide an explanation for changes in income concentration. To explain the development of the distribution of net equivalized income we analyze changes in the distribution of market income as well as shifts in the effectiveness of public redistribution mechanisms. We find that cyclical and structural changes in the labor market, the increasing relevance of capital income as well as the decreasing effectiveness of the public mechanisms of income redistribution are the main explanatory factors for the development of income inequality. In addition to this, we discuss several issues that are of high relevance for the distribution of economic resources but are not directly covered in the analysis of net equivalized income. Most significantly, the design of the tax and social security contributions burden as well as the rising relevance of value-added taxes have exhibited negative redistributive effects for low income households.

Education and Lifetime Income During Demographic Transition

The paper studies the power of educational investments in relation to transfers for fostering lifetime income and for reducing income inequality in Germany. The welfare analysis is based on a model of age-dependent human capital accumulation, featuring dynamic complementarities in skill formation over the life cycle, and calibrated for the period of ongoing demographic transition until 2080. If policy aims at reducing the inequality of lifetime income among people of the same generation, educational investments for people younger than or equal to seventeen do a better job compared to transfers in adulthood. In an intergenerational perspective all cohorts born after 1976 will gain from tax-financed additional investments in preschool education introduced in 2011. Additional investments into secondary education will, as a rule, not cause life time income to raise enough to compensate its costs.

The Evolution of Income Inequality in Germany and Switzerland Since the Turn of the Millennium

This paper presents and compares trends in income inequality in Switzerland and Germany from 2000 to 2009 using harmonized data from the Socio-Economic Panel (SOEP) and the Swiss Household Panel (SHP). Whereas in Germany inequality has increased substantially during this period, in Switzerland inequality in market incomes has increased only marginally and inequality in disposable incomes has decreased slightly. Economic and demographic indicators suggest that labor market participation — but not economic growth, globalization, or sectoral change — are potential explanations. The decomposition of inequality reveals the effects of Germany’s slightly older population and smaller household sizes, as well as the impact of educational expansion and government redistribution.

Understanding Rising Income Inequality in Germany, 1999/2000–2005/2006

We examine the factors behind rising income inequality in Europe's most populous economy. From 1999/2000 to 2005/2006, Germany experienced an unprecedented rise in net equivalized income inequality and poverty. At the same time, unemployment rose to record levels, part‐time and marginal part‐time work grew, and there was evidence for a widening distribution of labor incomes. Other factors that possibly contributed to the rise in income inequality were changes in the tax and transfer system, changes in the household structure (in particular the rising share of single parent households), and changes in other socio‐economic characteristics (e.g., age or education). We address the question of which factors were the main drivers of the observed inequality increase. Our results suggest that the largest part of the increase was due to increasing inequality in labor incomes, but that changes in employment outcomes and changes in the tax system also contributed considerable shares. By contrast, changes in household structures and household characteristics, as well as changes in the transfer system only seem to have played a minor role.

Can Employment Changes Explain Rising Income Inequality in Germany?

Abstract From 2000 to 2005, Germany experienced an unprecedented rise in net equivalized income inequality and poverty. At the same time, unemployment rose to record levels and overall employment stagnated, suggesting that changes in households' conditional employment outcomes were partly responsible for the inequality increase observed. Using DiNardo /Fortin /Lemieux's semiparametric kernel density reweighting method, we examine what part of the inequality and poverty increase can be accounted for by changes in households' conditional employment outcomes. Our results suggest that employment outcomes explain only around 14 percent of the inequality increase observed, and around 23 percent of the poverty increase observed, leaving plenty of room for the contribution of other factors. JEL-Classification: D31, C14, I30

DOES SIZE MATTER? THE IMPACT OF CHANGES IN HOUSEHOLD STRUCTURE ON INCOME DISTRIBUTION IN GERMANY

Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long‐term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.