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Factor Shares and Income Inequality - Empirical Evidence from Germany 2002-2008

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  • Martin Adler
  • Kai Daniel Schmid

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Abstract

We examine the interplay between changes in the functional distribution of income and the distribution of market income among households. We use micro data from the German Socio-Economic Panel as well as macro data from the German Federal Statistical Office from 2002 to 2008. We categorize and evaluate the implications of changes in the functional distribution of income upon the distribution of income among individuals on the basis of a simple theoretic framework that links the degree of the concentration of income from asset flows among individuals to the (structural) relationship between individuals' levels of market income and their respective income shares from asset flows. Our empirical analysis offers two insights: First, the relative rise of income from asset flows reported by German National Accounting Statistics is also evident in the micro data taken from the German Socio-Economic Panel. Second, rising capital income shares are associated with an increasing concentration of market income.

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Bibliographic Info

Paper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number 82.

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Length: 26 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:iaw:iawdip:82

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Keywords: Factor Shares; Income Distribution; Inequality; Market Income;

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  1. Ryan, Paul, 1996. "Factor Shares and Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 106-26, Spring.
  2. Rodrik, Dani, 2007. "How to Save Globalization from Its Cheerleaders," Working Paper Series rwp07-038, Harvard University, John F. Kennedy School of Government.
  3. Gustav A. Horn & Heike Joebges & Rudolf Zwiener, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (II)," IMK Report 40-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  4. Markus M. Grabka, 2010. "Codebook for the $PEQUIV File 1984-2009: CNEF Variables with Extended Income Information for the SOEP," Data Documentation 49, DIW Berlin, German Institute for Economic Research.
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Cited by:
  1. Kai Daniel Schmid & Ulrike Stein, 2013. "Explaining Rising Income Inequality in Germany, 1991-2010," SOEPpapers on Multidisciplinary Panel Data Research 592, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Eva Schlenker & Kai Daniel Schmid, 2013. "Capital Income Shares and Income Inequality in the European Union," IMK Working Paper 119-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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