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Income Dynamics in Germany, the USA and the UK: Evidence from Panel Data

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Author Info
Christian Schluter
Abstract

This paper is about the distributional dynamics of net household income in Germany, the US and the UK. We reject the common wisdom that Germany is a country in statsis: stable cross-sectional distributions are deceptive, concealing substantial movements beneath the surface. The US and the UK underwent a process of income polarisation. For the study of mobility, stochastic kernels are used, because standard approaches based on mobility indices and transition matrices, which group persons into income classes of arbitrary size, lead to misleading conclusions. The measures attribute greater mobility to Germany than to the US, but this ranking is entirely driven by the substantially greater mobility of the German poor. In order to determine whether incomes changes are transitory or permanent, a law of motion for income is estimated.

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Paper provided by Centre for Analysis of Social Exclusion, LSE in its series CASE Papers with number 08.

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Date of creation: Jun 1998
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Handle: RePEc:cep:sticas:08

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Web page: http://sticerd.lse.ac.uk/case/publications/

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Related research
Keywords: Income dynamics; mobility; kernel density estimates; stochastic kernels; transition matrices; covariance structure;

References listed on IDEAS
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  1. Shorrocks, A F, 1976. "Income Mobility and the Markov Assumption," Economic Journal, Royal Economic Society, vol. 86(343), pages 566-78, September. [Downloadable!] (restricted)
  2. Bourguignon, F. & Morrisson, C. & Atkinson, A.B., 1991. "Empirical Studies of Earnings Mobility," DELTA Working Papers 91-14, DELTA (Ecole normale supérieure).
  3. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February. [Downloadable!] (restricted)
  4. Quah, Danny T, 1996. "Aggregate and Regional Disaggregate Fluctuations," Empirical Economics, Springer, vol. 21(1), pages 137-59.
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  5. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ayala, L. & Sastre, M., 2002. "Europe vs. The United States: Is There a Trade-Off Between Mobility and Inequality?," European Economy Group Working Papers 19, European Economy Group. [Downloadable!]
  2. Andrew J. Houtenville, 2001. "Income Mobility in the United States and Germany: A Comparison of Two Classes of Mobility Measures using the GSOEP, PSID, and CPS," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(1), pages 59-65.
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