The impact of household capital income on income inequality—a factor decomposition analysis for the UK, Germany and the USA

Fräßdorf, Anna; Grabka, Markus M.; Schwarze, Johannes

doi:10.1007/s10888-009-9125-4

Cited by 40 publications

(33 citation statements)

References 31 publications

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“…Similar descriptions and applications of this method can be found in, for example, Aaberge et al (2000) or Fräßdorf et al (2011).…”

Section: Factor Decomposition Of Gini Coefficientmentioning

confidence: 82%

“…More specific evidence is provided by Becker (2000), Fräßdorf et al (2011), OECD (2011, and García-Peñalosa increased remarkably, which coincided with a falling share of earnings in total household income. As a consequence, the contribution of earned income to overall inequality increased only a little, while at the same time the contribution of capital income increased substantially.…”

Section: Index Representation (1991=1)mentioning

confidence: 92%

“…full-time labour income, atypical labour income, and capital income. As discussed in Section 2, we follow Aaberge et al (2000) and Fräßdorf et al (2011) in using the methodology proposed by Shorrocks (1982). the largest contribution to the Gini coefficient of household market income stems from full-time labour income.…”

Section: Full-time Labour Income Atypical Labour Income Capital Incomementioning

confidence: 99%

“…It contains detailed information on income from different sources. We use the decomposition technique for inequality measures proposed by Shorrocks (1982) and applied to Germany by Fräßdorf et al (2011). This methodology allows us to identify the contributions to overall inequality of single income components, while taking into account the three elements in play:…”

Section: Decomposition Using the Theil Indexmentioning

confidence: 99%

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Why Has Inequality in Germany Not Risen Further after 2005?

Rehm

Schmid

Wang³

2014

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SOEPpapers on Multidisciplinary Panel Data Research at DIW BerlinThis series presents research findings based either directly on data from the German SocioEconomic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.The decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly.Any opinions expressed in this series are those of the author(s) and not those of DIW Berlin.Research disseminated by DIW Berlin may include views on public policy issues, but the institute itself takes no institutional policy positions. AbstractIn this paper we explore the reasons for the trend reversal in the development of household market income inequality in Germany in the second half of the 2000s.We analyse to what extent the increasing relevance of capital income as well as the rising share of atypically employed persons have affected the development of income inequality over the last two decades. We use household data from the German SocioEconomic Panel from 1991-2011 and decompose market income into three income sources: (1) household labour income from full-time work, (2) household labour income from atypical work, and (3) household capital income. We apply the factor decomposition method suggested by Shorrocks (1982) to analyse the contribution of these income forms to overall inequality. Our results suggest that changes in the distribution of capital income were a key factor both in the strong increase of inequality in the first half of the 2000s and in the subsequent trend reversal. This finding contrasts with the reasoning that labour market developments were t...

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“…Similar descriptions and applications of this method can be found in, for example, Aaberge et al (2000) or Fräßdorf et al (2011).…”

Section: Factor Decomposition Of Gini Coefficientmentioning

confidence: 82%

Section: Index Representation (1991=1)mentioning

confidence: 92%

Section: Full-time Labour Income Atypical Labour Income Capital Incomementioning

confidence: 99%

Section: Decomposition Using the Theil Indexmentioning

confidence: 99%

See 2 more Smart Citations

Why Has Inequality in Germany Not Risen Further after 2005?

Rehm

Schmid

Wang³

2014

SSRN Journal

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“…The majority of these studies explores these effects employing inequality decomposition techniques that permit the estimation of the income sources' contribution to total income inequality (see e.g. Jenkins 1995;Jännti 1997;Papatheodorou 1998;Fräßdorf, Grabka and Schwarze 2011;OECD 2011;García-Peñalosa and Orgiazzi 2013;Wolff and Zacharias 2013). Although the results differ across countries and time periods, some common findings are the important contribution of capital and self-5 employment income to total inequality, the equalising role of social transfers and taxes and the significant effects of wage inequality on total inequality.…”

Section: Links Between Functional and Personal Income Distribution: Amentioning

confidence: 99%

Linking functional with personal income distribution: a stock-flow consistent approach

Dafermos

Papatheodorou

2015

International Review of Applied Economics

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This paper develops a benchmark stock-flow consistent model that links functional with personal income distribution. The model consists of various household groups that receive income from different sources or from the same sources in different proportions. The dynamic linkage between functional and personal income distribution is formulated as part of a complete macroeconomic system. Inequality decomposition techniques are employed to associate income sources with personal income distribution. Simulation exercises are conducted to reveal the various ways through which functional and personal income distribution interact. In the simulations a rise in the exogenous component of low-skilled workers' wage share reduces inequality in the short run; in the medium to long run inequality starts increasing due to certain macroeconomic developments, but remains lower than its initial level in almost all cases. A change in functional income distribution due to a rise in the dividend payout ratio of firms increases inequality both in the short run and the long run.

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Consumer Income

Xiao¹

2015

Consumer Economic Wellbeing

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The impact of household capital income on income inequality—a factor decomposition analysis for the UK, Germany and the USA

Cited by 40 publications

References 31 publications

Why Has Inequality in Germany Not Risen Further after 2005?

Why Has Inequality in Germany Not Risen Further after 2005?

Linking functional with personal income distribution: a stock-flow consistent approach

Consumer Income

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