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Lifetime Earnings Inequality in Germany

47 Pages Posted: 23 Oct 2011  

Timm Boenke

Free University of Berlin (FUB) - Department of Business and Economics

Giacomo Corneo

Free University of Berlin (FUB); Universität Osnabrück - Faculty of Business Administration - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Holger Lüthen

German Institute for Economic Research (DIW Berlin)

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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.

Keywords: lifetime earnings, earnings distribution, inequality, mobility, Germany

JEL Classification: D31, D33, H24

Suggested Citation

Boenke, Timm and Corneo, Giacomo and Lüthen, Holger, Lifetime Earnings Inequality in Germany. IZA Discussion Paper No. 6020. Available at SSRN: https://ssrn.com/abstract=1948016

Timm P. Boenke (Contact Author)

Free University of Berlin (FUB) - Department of Business and Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany

Giacomo Corneo

Free University of Berlin (FUB) ( email )

Kaiserswerther Str. 16-18
D-10785 Berlin, Berlin 14195
Germany

Universität Osnabrück - Faculty of Business Administration - Department of Economics ( email )

Rolandstr. 8
Osnabrueck, D-49069
Germany
+49 541 969 2730 (Phone)
+49 541 969 2722 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Institute for the Study of Labor (IZA)

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

Holger Lüthen

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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