Wealth Inequality and Private Savings: The Case of Germany

Abstract

This paper explores the interaction between corporate ownership concentration and privatesavings, and by extension, the current account balance in Germany. As high corporate savingslargely reflected capital income accruing to wealthy households and increasingly retained inclosely-held firms, the buildup of external imbalances in Germany has been accompanied bywidening top income inequality, rising private savings and compressed consumption rates.Rising corporate profits in an environment of high business wealth concentration account for90 percent of the rise in the private savings rate and a third of the increase in the Germancurrent account surplus over 1999-2016.

JEL Classification: G31, F12, O32, E01, K34, F3, G21, E2