Why has income inequality in Germany increased from 2002 to 2011? A behavioral microsimulation decomposition
No 2016/24, Discussion Papers from Free University Berlin, School of Business & Economics
I propose a method to decompose changes in income inequality into the contributions of policy changes, wage rate changes, and population changes while considering labor supply reactions. Using data from the Socio-Economic Panel (SOEP), I apply this method to decompose the increase in income inequality in Germany from 2002 to 2011, a period that saw tax reductions and a controversial overhaul of the transfer system. The simulations show that tax and transfer reforms have had an inequality reducing effect as measured by the Mean Log Deviation and the Gini coefficient. For the Gini, these effects are offset by labor supply reactions. In contrast, policy changes explain part of the increase in the ratio between the 90th and the 50th income percentile. Changes in wage rates have led to a decrease in income inequality. Thus, the increase in inequality was mainly due to changes in the population.
Keywords: Inequality; Decomposition; Labor Supply; Microsimulation; Policy Reform (search for similar items in EconPapers)
JEL-codes: D31 H23 I38 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-lma and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Journal Article: Why has Income Inequality in Germany Increased From 2002 to 2011? A Behavioral Microsimulation Decomposition (2019)
Working Paper: Why Has Income Inequality in Germany Increased from 2002 to 2011? A Behavioral Microsimulation Decomposition (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:201624
Access Statistics for this paper
More papers in Discussion Papers from Free University Berlin, School of Business & Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().