Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany
Institute for the Study of Labor (IZA); University of Cologne - Cologne Centre for Public Economics (CPE); University of Essex - Institute for Social and Economic Research (ISER)
Institute for the Study of Labor (IZA)
Institute for the Study of Labor (IZA); DIW Berlin, German Institute for Economic Research
October 26, 2010
CESifo Working Paper Series No. 3219
Income inequality in Germany has been continuously increasing during the past 20 years. In general, this is understood as an increase in inequality of wages due to changes in bargaining power of employees. However, the role of changing household structure is widely neglected. Societal trends like a decline in birth rate and an increase in the risk of divorce affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the rise in inequality was indeed more due to changes of household structure and employment behavior rather than changes in wages. Moreover, a large part of this increase is compensated by the welfare state.
Number of Pages in PDF File: 45
Keywords: income distribution, demography, household size, decomposition, Germany
JEL Classification: D31, D63, J11working papers series
Date posted: October 27, 2010
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