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Lifetime Earnings Inequality in Germany

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  • Lüthen, Holger
  • Bönke, Timm
  • Corneo, Giacomo

Abstract

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.

Suggested Citation

  • Lüthen, Holger & Bönke, Timm & Corneo, Giacomo, 2012. "Lifetime Earnings Inequality in Germany," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62074, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc12:62074
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    References listed on IDEAS

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    Cited by:

    1. Corneo Giacomo & Bönke Timm & Westermeier Christian, 2016. "Erbschaft und Eigenleistung im Vermögen der Deutschen: Eine Verteilungsanalyse," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(1), pages 35-53, April.
    2. Schröder, Carsten, 2012. "The sensitivity of distributional measures to the reference period of income," Kiel Working Papers 1777, Kiel Institute for the World Economy (IfW).
    3. Riphahn, Regina T. & Schnitzlein, Daniel D., 2016. "Wage mobility in East and West Germany," Labour Economics, Elsevier, vol. 39(C), pages 11-34.
    4. Haan, Peter & Kemptner, Daniel & Lüthen, Holger, 2017. "The Rising Longevity Gap by Lifetime Earnings: Distributional Implications for the Pension System," IZA Discussion Papers 11121, Institute for the Study of Labor (IZA).
    5. Giacomo Corneo, 2015. "Income inequality from a lifetime perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 225-239, May.
    6. Schröder, Carsten & Golan, Yolanda & Yitzhaki, Shlomo, 2014. "Inequality and the time structure of earnings: Evidence from Germany," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 349-409.
    7. Magnac, Thierry & Pistolesi, Nicolas & Roux, Sébastien, 2013. "Post schooling human capital investments and the life cycle variance of earnings," TSE Working Papers 13-380, Toulouse School of Economics (TSE).
    8. Giesecke, Matthias & Bönke, Timm & Lüthen, Holger, 2011. "The Dynamics of Earnings in Germany: Evidence from Social Security Records," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48692, Verein für Socialpolitik / German Economic Association.
    9. Peter Levell & Barra Roantree & Jonathan Shaw, 2016. "Mobility and the lifetime distributional impact of tax and transfer reforms," IFS Working Papers W16/17, Institute for Fiscal Studies.
    10. repec:bla:revinw:v:63:y:2017:i:3:p:542-563 is not listed on IDEAS
    11. Kemptner, Daniel & Haan, Peter & Lüthen, Holger, 2017. "The increasing longevity gap by lifetime earnings and its distributional implications," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168278, Verein für Socialpolitik / German Economic Association.
    12. Corneo, Giacomo, 2017. "Ein Staatsfonds, der eine soziale Dividende finanziert," Discussion Papers 2017/13, Free University Berlin, School of Business & Economics.
    13. Koerselman, Kristian & Uusitalo, Roope, 2014. "The risk and return of human capital investments," Labour Economics, Elsevier, vol. 30(C), pages 154-163.
    14. Corneo Giacomo, 2015. "Kreuz und quer durch die deutsche Einkommensverteilung," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(2), pages 109-126, June.
    15. Bönke, Timm & Kemptner, Daniel & Lüthen, Holger, 2016. "Effectiveness of early retirement disincentives: Individual welfare, distributional and fiscal implications," Discussion Papers 2016/2, Free University Berlin, School of Business & Economics.
    16. Feld Lars P. & Schmidt Christoph M., 2016. "Jenseits der schrillen Töne," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(2), pages 188-205, July.
    17. Bradbury, Katharine L., 2016. "Levels and trends in the income mobility of U.S. families, 1977−2012," Working Papers 16-8, Federal Reserve Bank of Boston.
    18. Songül Tolan, 2017. "The Effect of Partial Retirement on Labor Supply, Public Balances and the Income Distribution: Evidence from a Structural Analysis," Discussion Papers of DIW Berlin 1679, DIW Berlin, German Institute for Economic Research.
    19. repec:jid:journl:y:2018:v:25:i:1:p:1-53 is not listed on IDEAS
    20. Gabriel Felbermayr & Michele Battisti & Sybille Lehwald, 2016. "Einkommensungleichheit in Deutschland, Teil 1: Gibt es eine Trendumkehr?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(13), pages 28-37, July.
    21. Zimmermann, Markus & Fitzenberger, Bernd & Osikominu, Aderonke, 2016. "Cohort Changes in Educational Pathways and Returns to Education," Annual Conference 2016 (Augsburg): Demographic Change 145927, Verein für Socialpolitik / German Economic Association.
    22. Nico Pestel & Eric Sommer, 2017. "Shifting Taxes from Labor to Consumption: More Employment and more Inequality?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 542-563, September.
    23. Stefan Humer & Mathias Moser & Matthias Schnetzer, 2017. "Inheritances and the Accumulation of Wealth in the Eurozone," ICAE Working Papers 73, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    24. Boll, Christina & Jahn, Malte & Lagemann, Andreas, 2017. "The gender lifetime earnings gap: Exploring gendered pay from the life course perspective," HWWI Research Papers 179, Hamburg Institute of International Economics (HWWI).

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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