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Do housing costs eat up all regional income disparities?

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  • Klick, Larissa
  • Schaffner, Sandra

Abstract

There exists empirical evidence for Germany that income inequality has increased. Further, development of housing prices is quite heterogeneous between regions. In this paper we analyze regional inequality regarding purchasing power per capita. By contrast to the existing literature we apply comprehensive data on the 1x1 km level. Consequently, this very precise delineation gives much better insights into regional disparities also below the level of administrative borders. In accordance with the existing literature we cannot observe increasing regional disparities. Further, first results indicate that there is a strong correlation between purchasing power and housing costs. The regional disparities will be described via inequality measurements and its decomposition. By a strong positive correlation between the price index for house purchases (RWI-GEO-REDX) and purchasing power, a dilution of regional purchase power can be found when taking real estate prices into account. Regional disparities vanish according to the analysis of the small-scale data.

Suggested Citation

  • Klick, Larissa & Schaffner, Sandra, 2019. "Do housing costs eat up all regional income disparities?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203621, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc19:203621
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    References listed on IDEAS

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    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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    4. Martin Biewen & Andos Juhasz, 2012. "Understanding Rising Income Inequality in Germany, 1999/2000–2005/2006," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(4), pages 622-647, December.
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    More about this item

    Keywords

    Regional Disparities; Housing prices;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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