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

  • Martin Adler
  • Kai Daniel Schmid

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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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.407067.de/diw_sp0460.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 460.

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Length: 21 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp460
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  1. Rodrik, Dani, 2007. "How to Save Globalization from its Cheerleaders," CEPR Discussion Papers 6494, C.E.P.R. Discussion Papers.
  2. Gustav A. Horn & Katharina Dröge & Simon Sturn & Till van Treeck & Rudolf Zwiener, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (III)," IMK Report 41-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  3. 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.
  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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