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Lifetime Earnings Inequality in Germany

  • Bönke, Timm

    ()

    (Free University of Berlin)

  • Corneo, Giacomo

    ()

    (Free University of Berlin)

  • Lüthen, Holger

    ()

    (DIW Berlin)

This paper documents the magnitude, pattern, and evolution of lifetime earnings inequality in Germany. Based on a large sample of earning biographies from social security records, we show that the intra-generational distribution of lifetime earnings of male workers has a Gini coefficient around .2 for cohorts born in the late 1930s and early 1940s; this amounts to about 2/3 of the value of the Gini coefficient of annual earnings. Within cohorts, mobility in the distribution of yearly earnings is substantial at the beginning of the lifecycle, decreases afterwards and virtually vanishes after age forty. Earnings data for thirty-one cohorts reveals striking evidence of a secular rise of intra-generational inequality in lifetime earnings: West-German men born in the early 1960s are likely to experience about 80 % more lifetime inequality than their fathers. In contrast, both short-term and long-term intra-generational mobility have been rather stable. Longer unemployment spells of workers at the bottom of the distribution of younger cohorts contribute to explain 30 to 40 % of the overall increase in lifetime earnings inequality.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6020.

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Length: 47 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6020
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  1. Johannes Gernandt & Friedhelm Pfeiffer, 2006. "Rising Wage Inequality in Germany," Working Papers of the Research Group Heterogenous Labor 06-12, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  2. Nicola Fuchs-Schuendeln & Dirk Krueger & Mathias Sommer, 2010. "Inequality Trends for Germany in the Last Two Decades: A Tale of Two Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 103-132, January.
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  7. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
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  13. Bjorklund, Anders, 1993. "A Comparison between Actual Distributions of Annual and Lifetime Income: Sweden 1951-89," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(4), pages 377-86, December.
  14. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
  15. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 303-330, 06.
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  19. Anders Bohlmark & Matthew J. Lindquist, 2006. "Life-Cycle Variations in the Association between Current and Lifetime Income: Replication and Extension for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 879-900, October.
  20. Bhuller, Manudeep & Mogstad, Magne & Salvanes, Kjell G., 2011. "Life-Cycle Bias and the Returns to Schooling in Current and Lifetime Earnings," IZA Discussion Papers 5788, Institute for the Study of Labor (IZA).
  21. Mark M. Trede, 1998. "The age profile of mobility measures: an application to earnings in West Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(4), pages 397-409.
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  24. Esfandiar Maasoumi & Mark Trede, 2001. "Comparing Income Mobility In Germany And The United States Using Generalized Entropy Mobility Measures," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 551-559, August.
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