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Regional Income Stratification in Unified Germany Using a Gini Decomposition Approach

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  • Joachim R. Frick
  • Jan Goebel

Abstract

This paper delivers new insights into the development of income inequality and regional stratification in Germany after unification using a new method for detecting social stratification by a decomposition of the GINI index which yields the obligatory between- and withingroup components as well as an "overlapping" index for the different sup-populations. We apply this method together with a jackknife estimation of standard errors. We find that East Germany is still a stratum on its own when using post-government income, but since 2001 no longer is when using pre-government income. These results remain stable when using alternatively defined regional classifications. However, there are also indications of some regional variation within West Germany. Overall, these findings are important for the political discussion with respect to a potential regional concentration of future transfers from East to West Germany.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43930.de/dp540.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 540.

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Length: 32 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:diw:diwwpp:dp540

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Keywords: Inequality decomposition; Gini; Stratification; German unification; Regional disparities; SOEP;

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References

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  1. Hunt, Jennifer, 1999. "Post-Unification Wage Growth in East Germany," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2106, C.E.P.R. Discussion Papers.
  2. Schechtman, E. & Yitzhaki, S., 1999. "On the proper bounds of the Gini correlation," Economics Letters, Elsevier, Elsevier, vol. 63(2), pages 133-138, May.
  3. Michael Funke & Roberta Colavecchio & Declan Curran, 2011. "Drifting together of falling apart? The empirics of regional economic growth in post-unification Germany," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 21102, Hamburg University, Department of Economics.
  4. Frick, Joachim R. & Grabka, Markus M., 2003. "Imputed Rent and Income Inequality: A Decomposition Analysis for Great Britain, West Germany and the U.S," EconStor Open Access Articles, ZBW - German National Library of Economics, ZBW - German National Library of Economics, pages 513-537.
  5. Pyatt, Graham, 1976. "On the Interpretation and Disaggregation of Gini Coefficients," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 86(342), pages 243-55, June.
  6. Maria Grazia Pittau, 2005. "Fitting Regional Income Distributions in the European Union," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 67(2), pages 135-161, 04.
  7. Lerman, Robert I. & Yitzhaki, Shlomo, 1984. "A note on the calculation and interpretation of the Gini index," Economics Letters, Elsevier, Elsevier, vol. 15(3-4), pages 363-368.
  8. Lammers, Konrad, 2003. "Süd-Nord-Gefälle in West- und Ostdeutschland?," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 83(11), pages 736-739.
  9. Yitzhaki, Shlomo & Lerman, Robert I, 1991. "Income Stratification and Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 313-29, September.
  10. Grabka, Markus M. & Schwarze, Johannes & Wagner, Gert G., 1999. "How unification and immigration affected the German income distribution," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 867-878, April.
  11. Yitzhaki, Shlomo, 1994. "Economic distance and overlapping of distributions," Journal of Econometrics, Elsevier, Elsevier, vol. 61(1), pages 147-159, March.
  12. Martin Biewen, 2001. "Measuring the Effects of Socio-Economic Variables on the Income Distribution: An Application to the East German Transition Process," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 185-190, February.
  13. Jan Goebel & Peter Krause & Jürgen Schupp, 2005. "Growth in Unemployment Raises Poverty Rates: Most Low-Wage Earnings Constitute Supplement to Primary Household Income," Weekly Report, DIW Berlin, German Institute for Economic Research, DIW Berlin, German Institute for Economic Research, vol. 1(10), pages 115-122.
  14. Forster, Michael & Jesuit, David & Smeeding, Timothy, 2003. "Regional Poverty and Income Inequality in Central and Eastern Europe: Evidence from the Luxembourg Income Study," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  15. Joachim R. Frick & Jan Goebel & Markus M. Grabka, 2005. "Zur langfristigen Entwicklung von Einkommen und Armut in Deutschland: starke Reduktion der arbeitsmarktbedingten Ungleichheit durch sozialstaatliche Maßnahmen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 72(4), pages 59-68.
  16. Kurt Geppert, 1999. "Süd-Nord-Gefälle eingeebnet?: Zur räumlichen Wirtschaftsentwicklung in Westdeutschland," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 66(3), pages 67-78.
  17. Frick, Joachim R. & Goebel, Jan & Schechtman, Edna & Wagner, Gert G. & Yitzhaki, Shlomo, 2004. "Using Analysis of Gini (ANoGi) for Detecting Whether Two Sub-Samples Represent the Same Universe: The SOEP Experience," IZA Discussion Papers 1049, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. Shlomo Yitzhaki & Edna Schechtman, 2009. "The “melting pot”: A success story?," Journal of Economic Inequality, Springer, Springer, vol. 7(2), pages 137-151, June.
  2. Helmut Rainer & Thomas Siedler, 2006. "Does Democracy Foster Trust?," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 609, DIW Berlin, German Institute for Economic Research.
  3. Denis Gerstorf & Nilam Ram & Jan Goebel & Jürgen Schupp & Ulman Lindenberger & Gert G. Wagner, 2010. "Where People Live and Die Makes a Difference: Individual and Geographic Disparities in Well-Being Progression at the End of Life," SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin, The German Socio-Economic Panel (SOEP) 287, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Gerasimova, Irina, 2009. "Sources of Income as a Factor of Interregional Social Economic Differentiation of the Russia’s Population (1995-2007)," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 16(4), pages 60-84.
  5. Andreas Peichl & Nico Pestel & Hilmar Schneider, 2012. "Does Size Matter? The Impact Of Changes In Household Structure On Income Distribution In Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 58(1), pages 118-141, 03.
  6. Gundi Knies & C. Katharina Spieß, 2007. "Regional Data in the German Socio-Economic Panel Study (SOEP)," Data Documentation, DIW Berlin, German Institute for Economic Research 17, DIW Berlin, German Institute for Economic Research.
  7. Gertrudes Saúde Guerreiro, 2012. "Regional Income Distribution in Portugal," CEFAGE-UE Working Papers, University of Evora, CEFAGE-UE (Portugal) 2012_06, University of Evora, CEFAGE-UE (Portugal).
  8. Bruckmeier, Kerstin & Schwengler, Barbara, 2009. "The impact of federal social policies on spatial income inequalities in Germany : empirical evidence from social security data," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200901, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  9. Paolo Liberati & Shlomo Yitzhaki, 2012. "GDP and beyond: an implementation of welfare considerations to the distribution of earnings in Italy," Departmental Working Papers of Economics - University 'Roma Tre', Department of Economics - University Roma Tre 0146, Department of Economics - University Roma Tre.

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