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Regional Income Stratification in Unified Germany Using a Gini Decomposition Approach

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  • Frick, Joachim R.

    (DIW Berlin)

  • Goebel, Jan

    ()
    (DIW Berlin)

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 within-group 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1891.

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Length: 35 pages
Date of creation: Dec 2005
Date of revision:
Publication status: published in: Regional Studies, 2008, 42(4), 555-577
Handle: RePEc:iza:izadps:dp1891

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Keywords: regional disparities; SOEP; German unification; stratification; Gini; inequality decomposition;

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References

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  1. Yitzhaki, Shlomo & Lerman, Robert I, 1991. "Income Stratification and Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 313-29, September.
  2. Joachim R. Frick & Markus M. Grabka, 2003. "Imputed Rent and Income Inequality: A Decomposition Analysis for Great Britain, West Germany and the U.S," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 513-537, December.
  3. Yitzhaki, Shlomo, 1994. "Economic distance and overlapping of distributions," Journal of Econometrics, Elsevier, vol. 61(1), pages 147-159, March.
  4. Lerman, Robert I. & Yitzhaki, Shlomo, 1984. "A note on the calculation and interpretation of the Gini index," Economics Letters, Elsevier, vol. 15(3-4), pages 363-368.
  5. Grabka, Markus M. & Schwarze, Johannes & Wagner, Gert G., 1999. "How Unification and Immigration Affected the German Income Distribution," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 867-878.
  6. Roberta Colavecchio & Declan Curran & Michael Funke, 2005. "Drifting Together or Falling Apart? The Empirics of Regional Economic Growth in Post-Unification Germany," CESifo Working Paper Series 1533, CESifo Group Munich.
  7. Pyatt, Graham, 1976. "On the Interpretation and Disaggregation of Gini Coefficients," Economic Journal, Royal Economic Society, vol. 86(342), pages 243-55, June.
  8. 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.
  9. 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.
  10. Maria Grazia Pittau, 2005. "Fitting Regional Income Distributions in the European Union," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(2), pages 135-161, 04.
  11. 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 UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  12. 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, vol. 83(11), pages 736-739.
  13. Schechtman, E. & Yitzhaki, S., 1999. "On the proper bounds of the Gini correlation," Economics Letters, Elsevier, vol. 63(2), pages 133-138, May.
  14. Jennifer Hunt, 1999. "Post-Unification Wage Growth in East Germany," NBER Working Papers 6878, National Bureau of Economic Research, Inc.
  15. 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.
  16. 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, vol. 1(10), pages 115-122.
  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. Gertrudes Saúde Guerreiro, 2012. "Regional Income Distribution in Portugal," CEFAGE-UE Working Papers 2012_06, University of Evora, CEFAGE-UE (Portugal).
  2. 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", vol. 16(4), pages 60-84.
  3. 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 200901, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  4. Rainer, Helmut & Siedler, Thomas, 2009. "Does democracy foster trust?," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 251-269, June.
  5. 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' 0146, Department of Economics - University Roma Tre.
  6. Shlomo Yitzhaki & Edna Schechtman, 2009. "The “melting pot”: A success story?," Journal of Economic Inequality, Springer, vol. 7(2), pages 137-151, June.
  7. Andreas Peichl & Nico Pestel & Hilmar Schneider, 2010. "Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany," CESifo Working Paper Series 3219, CESifo Group Munich.
  8. Gundi Knies & C. Katharina Spieß, 2007. "Regional Data in the German Socio-Economic Panel Study (SOEP)," Data Documentation 17, DIW Berlin, German Institute for Economic Research.
  9. 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 287, DIW Berlin, The German Socio-Economic Panel (SOEP).

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