Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany

45 Pages Posted: 27 Oct 2010

See all articles by Andreas Peichl

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research; University of Mannheim - School of Economics (VWL); IZA Institute of Labor Economics; University of Essex - Institute for Social and Economic Research (ISER)

Nico Pestel

IZA Institute of Labor Economics

Hilmar Schneider

IZA Institute of Labor Economics; DIW Berlin, German Institute for Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: October 26, 2010

Abstract

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.

Keywords: income distribution, demography, household size, decomposition, Germany

JEL Classification: D31, D63, J11

Suggested Citation

Peichl, Andreas and Pestel, Nico and Schneider, Hilmar, Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany (October 26, 2010). CESifo Working Paper Series No. 3219. Available at SSRN: https://ssrn.com/abstract=1697989

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim - School of Economics (VWL) ( email )

Mannheim 68131
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Nico Pestel

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Hilmar Schneider (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

DIW Berlin, German Institute for Economic Research

Mohrenstraße 58
Berlin, 10117
Germany

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