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

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  • Martin Adler
  • Kai Daniel Schmid

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.

Suggested Citation

  • Martin Adler & Kai Daniel Schmid, 2012. "Factor Shares and Income Inequality: Empirical Evidence from Germany 2002-2008," SOEPpapers on Multidisciplinary Panel Data Research 460, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp460
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    References listed on IDEAS

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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. Ryan, Paul, 1996. "Factor Shares and Inequality in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 12(1), pages 106-126, Spring.
    3. Gustav A. Horn & Heike Joebges & Torsten Niechoj & Christian R. Proaño & Simon Sturn & Silke Tober & Achim Truger & Till van Treeck, 2009. "Von der Finanzkrise zur Weltwirtschaftskrise (I)," IMK Report 38-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Schäfer, Claus, 2010. "Zukunftsgefährdung statt Krisenlehren - WSI-Verteilungsbericht 2010," WSI-Mitteilungen, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 63(12), pages 636-645.
    5. 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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    Citations

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    Cited by:

    1. Eva Schlenker & Kai Schmid, 2015. "Capital income shares and income inequality in 16 EU member countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 241-268, May.
    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.
    3. Laura Chies, 2013. "Riforme del mercato del lavoro e distribuzione del reddito in Germania," ECONOMIA E SOCIET REGIONALE, FrancoAngeli Editore, vol. 0(2), pages 42-64.
    4. 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).
    5. Kai Daniel Schmid & Andreas Peichl & Moritz Drechsel-Grau, 2015. "Factor shares, personal income distribution and top incomes in Germany," IMK Report 108e-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    6. Miriam Rehm & Kai Daniel Schmid & Dieter Wang, 2014. "Why Has Inequality in Germany Not Risen Further after 2005?," SOEPpapers on Multidisciplinary Panel Data Research 690, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Späth Jochen & Schmid Kai Daniel, 2018. "The Distribution of Household Savings in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 238(1), pages 3-32, February.
    8. Tanguiane, Andranick S., 2016. "Devaluation of one's labor in labor-commodities-money-commodities-labor exchange as a cause of inequality growth," Working Paper Series in Economics 86, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    9. Molero-Simarro, Ricardo, 2017. "Inequality in China revisited. The effect of functional distribution of income on urban top incomes, the urban-rural gap and the Gini index, 1978–2015," China Economic Review, Elsevier, vol. 42(C), pages 101-117.
    10. Andreas Peichl & Martin Ungerer & Richard Hauser & Stefan Sell & Judith Niehues & Christoph Schröder & Dorothee Spannagel & Anita Tiefensee & Helmut Dedy & Gerhard Bosch & Thorsten Kalina, 2017. "Mythos oder Realität: Werden die Armen immer ärmer und die Reichen immer reicher?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(10), pages 03-26, May.
    11. Valeria Cirillo & Marcella Corsi & Carlo D'Ippoliti, 2015. "Gender, class and the crisis," Working Papers CEB 15-026, ULB -- Universite Libre de Bruxelles.
    12. Mr. Carlos Mulas-Granados & Maura Francese, 2015. "Functional Income Distribution and Its Role in Explaining Inequality," IMF Working Papers 2015/244, International Monetary Fund.

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    More about this item

    Keywords

    Factor shares; income distribution; inequality; market income;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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