INCOME INEQUALITY IN GERMANY DURING THE 1980s AND 1990s

The paper estimates a variety of inequality measures for three sub-samples of the German population using cross-sectional data on equivalent income from the German Socio-Economic Panel (GSOEP). The sub-populations under consideration are residents of West Germany including foreigners for the years 1984 to 1996, residents of East Germany for the years 1990 to 1996 and a comprehensive German population for the years 1990 to 1996. Bootstrap methods are applied to test whether changes in inequality are statistically significant. In order to account for panel attrition and over-sampling, sample weights are incorporated into the estimation procedure. The empirical results confirm the relative stability of the West German income distribution. While income inequality in West Germany has generally not altered in an economically relevant way over the period 1985 to 1996, inequality in East Germany has increased after reunification. Despite this increase, inequality remains substantially higher in the western part of the country. Convergence of eastern mean income to the western level generally overcompensated the rise in inequality in East Germany, so that the level of inequality in unified Germany is lower in 1996 than in 1990.     

THE SPATIAL STRUCTURE OF INCOME INEQUALITY IN THE ENLARGED EU

This study examines how personal disposable income is distributed across regions, countries and larger geographical areas in the EU25 and how this distribution changed during the second half of the 1990s. Moreover, it assesses the "statistical" effect resulting from the enlargement of the European Union, and therefore the community of people for which inequality is measured. A three-level spatial decomposition of the overall personal inequality in the EU reveals that a fifth of its amount is attributed to the east–west income gap and that intra-regional inequality accounts for three quarters. The study detects a convergence of both average national income levels and within-country personal income inequality. Inequality is rising primarily in the Scandinavian social-democratic welfare states and decreasing in the Mediterranean countries of the EU15. In Eastern Central Europe, the rapid growth of inequality which had been observable during the first years of transition has come to an end.     

LABOR EARNINGS AND HOUSEHOLD INCOME MOBILITY IN REUNIFIED GERMANY: A COMPARISON OF THE EASTERN AND WESTERN STATES

Using data from the German Socio-Economic Panel, we compare income mobility of persons from the eastern and western states of Germany between 1990 and 1995. We consider income mobility between consecutive years and between the first and the final year of this time period. We find that gross individual labor income mobility was much higher in the east than in the west during the first years after reunification, but that this difference has become much smaller until 1995. Changing to measures that reflect economic well-being more accurately, we observe that gross equivalent labor income mobility and net equivalent income mobility initially were also much higher in the eastern states than in the western states, but converged over time as well. This convergence has been particularly strong for net equivalent income mobility, suggesting that the social protection system has greatly reduced mobility risks associated with the transformation process in the eastern states of Germany.     

STATE PATTERNS IN FAMILY INCOME INEQUALITY

It is well known that U.S. income inequality began to increase in the 1970s and increased sharply in the 1980s. Yet, what is less well known is that this upward trend was not uniform across states. Some states experienced almost no increase in family income inequality, while other states experienced dramatic increases. We use the variation in state trends to examine factors that may underlie shifts in U.S. income inequality. Among numerous factors, we include variables that allow us to examine the role that state and local economic development policy may play. Also, in examining state income inequality differences that could not be explained by economic factors, we explore the possibility that cultural and social norm factors affect state income inequality.     

股市发展与收入分配不平等

股市发展与收入分配状况的关系是金融理论界和业界广泛关注的问题之一。本文构造全球33个国家从1988年至2013年有关股市发展和收入分配不平等的面板数据,实证研究各国股市发展及自由化改革对其收入分配不平等程度的影响及内在机理。研究发现：首先,一国股市规模越大,由于门槛效应的存在,其收入分配状况趋于恶化,而流动性的提升将在一定程度上改善其收入分配状况。其次,一国股市的发展对不同收入阶层存在不同的影响。最后,股市自由化前后,股市对收入分配状况的影响存在显著差异：股市自由化之后,股市规模的扩大和股市流动性的提升将在一定程度上改善收入分配状况。     

CHANGES IN CANADIAN FAMILY INCOME AND FAMILY CONSUMPTION INEQUALITY BETWEEN 1978 AND 1992

This paper uses Canadian cross-sectional income and expenditure data to examine changes in the distribution of family income and family consumption during the period 1978 to 1992. Family consumption data are analyzed because in the presence of intertemporal consumption smoothing, the cross-sectional distribution of consumption may characterize the distribution of lifetime wealth. I find that both Canadian family income inequality and Canadian family consumption inequality moved countercyclically. In addition, both Canadian family income inequality and Canadian family consumption inequality trended upward over the period; however, the change in family consumption inequality was much smaller than the change in family income inequality, suggesting that inequality in the distribution of lifetime wealth may have changed much less than is suggested by changes in the distribution of income.     

ECONOMIC FREEDOM AND INCOME INEQUALITY REVISITED: EVIDENCE FROM A PANEL ERROR CORRECTION MODEL

We investigate the causal relationship between income inequality and economic freedom using data from U.S. states over the period 1981 to 2004 within a panel error correction model framework. The results indicate bidirectional causality between income inequality and economic freedom in both the short and the long run. These results suggest that high income inequality may cause states to implement redistributive policies causing economic freedom to decline. As economic freedom declines, income inequality rises even more. In other words, it is quite possible for a state to get caught in a vicious circle of high income inequality and heavy redistribution. (JEL D63, H11)     

INEQUALITY OF OPPORTUNITIES VS. INEQUALITY OF OUTCOMES: ARE WESTERN SOCIETIES ALL ALIKE?

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003 ). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar “Gini” index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries.     

The Covariance Structure of East and West German Incomes and its Implications for the Persistence of Poverty and Inequality

Abstract. Based on data from the German Socio-Economic Panel (GSOEP), this paper analyzes the dynamics of equivalent income in East and West Germany in the years following reunification. Special emphasis is given to the separation of permanent and transitory components, the persistence of transitory shocks and their implications for the persistence of poverty and inequality. The results suggest that in West Germany, between 52 and 69 per cent of cross-sectional income inequality was permanent, and that poor individuals stayed in poverty for two years on average. In East Germany, the share of the permanent component in overall income inequality rose continuously from 20 per cent in 1990 to 72 per cent in 1998, reaching a level near the one that prevailed in West Germany during the same period. The rising importance of time-invariant components in East German incomes was also reflected in expected poverty durations which slightly increased from 1.47 years in 1990 to 1.67 years in 1998.     

GROWTH, INEQUALITY, AND POVERTY: A CAUTIONARY NOTE

Economic growth had less impact on poverty rates in the 1980s than in the 1960s. Could this be explained by Locke Anderson's observation that the higher median income, the greater the amount of growth needed to achieve a percentage point fall in the poverty rate? No, higher poverty rates are due instead to the rise in income inequality. With higher inequality, however, trickle down could be as effective in the 1990s as it was in the late 1960s. More generally, assessments of anti-poverty policy must recognize that inequality is as vital to changes in the poverty rate as growth in mean income.     

LIFE SATISFACTION AND INCOME INEQUALITY

Do people care about income inequality and does income inequality affect subjective well‐being? Welfare theories can predict either a positive or a negative impact of income inequality on subjective well‐being and empirical research has found evidence of a positive, negative, or non‐significant relation. This paper attempts to determine some of the possible causes of such empirical heterogeneity. Using a very large sample of world citizens we test the consistency of the effect of income inequality in predicting life satisfaction. We find that income inequality has a negative and significant effect on life satisfaction. This result is robust to changes of regressors and estimation choices and also persists across different income groups and across different types of countries. However, this relation is easily obscured or reversed by multicollinearity generated by the use of country and year fixed effects. This is particularly true if the number of data points for inequality is small, which is a common feature of cross‐country or longitudinal studies.     

The distributional impact of unification and the 1992–93 recession on West German households

The 1992–93 recession in the western states of Germany has been attributed, in substantial measure, to the macroeconomic consequences of policies to finance unification. Studies of the costs of unification have not attempted to measure the burden of the recession. We estimate a dynamic, panel model of household incomes using data from the German Socio-Economic Panel (GSOEP) and use it to forecast what these incomes would have been in 1992–94 without a recession. Using a ratio of actual to forecast incomes, we compare the relative burden of the recession across households. Our findings suggest that western households below the median income bore the brunt of the combined impact of unification and the recession of 1992–93.
JEL classification: P3, D3, E3.     

"NOMINAL" AND "REAL" INTERSTATE INCOME INEQUALITY IN THE UNITED STATES: SOME ADDITIONAL EVIDENCE

Using a good inequality index, and data on personal income and cost-of-living estimates for the period 1981–90, interstate inequality in "nominal" and "real" personal income per capita is compared. Four points are noted. First, inequality in real income is smaller than that in nominal income. Second, while the nominal-income inequality shows the well-known increase over the 1980s, real-income inequality declined during the period. Third, inequality patterns in the wage and the non-wage components of income are somewhat different. Last, even the nominal-income inequality indicates a decline in the early 1990s.     

EQUALITY OF OPPORTUNITY: EAST VS. WEST GERMANY

The case of German reunification has been subject to extensive research on earnings inequality and labour market integration. However, little is known about the development of equality of opportunity (EOp) in East and West Germany after 1990. Using German micro data, we empirically analyse how circumstances beyond the sphere of individual control relate to inequality in East and West Germany. Our results show that EOp is larger in East than in West Germany. However, despite increasing income inequality, EOp remained surprisingly constant.     

PERMANENT INCOME, CONVERGENCE AND INEQUALITY AMONG COUNTRIES

The literature on inequality has generally focused on the analysis of annual per capita income. This paper adopts a different approach by considering the life-cycle dimension of inequality and convergence between economies from 1960 to 2000. We analyze the present value of the set of incomes individuals obtain throughout their whole life (permanent income). On the basis of this approach, various simulations are made to determine the effect on inequality in permanent income of variables such as survival rates and the long-run growth rates in current income. The results indicate that survival rates are an important source of inequality. Inequality in permanent income is about one third higher than in current income. The implication of this finding is that if the whole life-cycle dimension is not considered, the level of inequality among economies is being underestimated.     

THE INEQUALITY OF EMPLOYMENT AND SELF-EMPLOYMENT INCOMES: A DECOMPOSITION ANALYSIS FOR THE U.K.

U.K. employment and self-employment income inequality are analysed over 1979–94/95. Robust inequality decompositions reveal occupation to be a relatively important and hitherto neglected determinant of earnings inequality. In contrast, self-employment income inequality is harder to explain, although occupation is also the most important single factor in the mid-1990s. The paper also provides a novel implementation of a decomposition of changes in Kolm's inequality index.     

INEQUALITY OF WAGE RATES,EARNINGS AND FAMILY INCOME IN THE UNITED STATES, 1975–2002

This paper analyzes distributional changes over the last quarter of the twentieth century. We focus on four distinct distributions: the distribution of hourly wage rates, the distribution of annual earnings of individuals, the distribution of annual earnings of families, and the distribution of total family income adjusted for family size. Both male wage rate inequality and family income inequality accelerated during the early 1980s, increased at a slower rate through the early 1990s and then stabilized at a high level through the early 2000s. The similarity in the timing of changes in these two distributions has been used as evidence that increased family income inequality primarily reflects increased inequality of wage rates. We show that other important factors were also at work.     

THE STRUCTURE OF AMERICAN INCOME INEQUALITY*

Income inequality is examined using the Panel Study of Income Dynamics and a consistent decomposition analysis. I only use inequality measures that satisfy the Principle of Transfers, have the property that a ceteris paribus increase in inequality within any subgroup increases overall inequality, and are independent of the scale of income and population. Decompositions are carried out by family size and by age of head for several definitions of income and income recipient. Whilst changing the time unit over which income is measured has a substantial impact on inequality, the effect of removing the between-age-group component of inequality is relatively slight.     

INTERSTATE INCOME INEQUALITY IN THE UNITED STATES: MEASUREMENT, MODELLING AND SOME CHARACTERISTICS

Five points are made in this study. First, using a well-recommended measure, interstate income inequality is reported for each year from 1950 through 1989, and its very small magnitude is pointed out along with the U-shaped profile. Second, it is shown that a simple quadratic-form model fits the data extremely well. Third, inequality indices for 1977 and 1988 are recomputed after adjusting for interstate price-level variations, and large reductions in the indices, and a virtual disappearance of the increase in inequality after 1978, are noted. Fourth, a simple decomposition shows that income changes account for most of the inequality change in each decade. Last, states that have contributed most to inequality are identified.     

Development Policy Implications for Growth and Regional Inequality in a Small Open Economy: The Indian Case

Inclusive economic development has become a pressing goal of government policy in India in the face of rising regional inequality. This paper examines the role of targeted development policy action in inducing economic growth and also in reducing regional income inequality during the last two decades (since the beginning of the 1990s)—a period marked by increasing trade openness. In our disaggregated analysis of the states, we find that while the government capital expenditure policy has had significant positive impact on output growth of the poorer states, it failed to break the trend of escalating regional inequality. The policy has been significantly more effective in enhancing manufacturing sector output in the poorer states compared with the richer states. On the trade front, while the poorer states gained somewhat in income growth from greater openness, the gains were not large enough to offset the increasing regional disparity.