Researchers Request Additional Data to Measure Income Distribution

The distribution of market income between individual households in Germany is sensitive to developments in the German national economy. This is the case at both ends of the income scale, depending on the type of data used. This is the finding of a study carried out in cooperation between the Centre for European Economics Research (ZEW), Mannheim, and the Macroeconomic Policy Institute (Institut für Makroökonomie und Konjunkturforschung, IMK) at the Hans-Böckler Foundation, Düsseldorf. It is above all the availability of administrative data, which is less than ideal, and which renders it extremely difficult to provide sound measurements of developments in income inequality. From a research perspective, this is a clear shortcoming, which is why researchers are now requesting access to better data from state sources.

Whilst variations in unemployment primarily affect those in the lower and middle ranges of income distribution, top incomes go hand in hand with business and capital gains. What may sound like a banality, however, is by no means a given; researchers from ZEW and IMK have proven the correlation between a high income concentration and the economic cycle only with the aide of data from the German Taxpayer Panel (TPP), which is based on annual income tax statistics.  Until now, analyses of trends in income inequality in Germany have generally been based on household surveys such as the German Socio-Economic Panel (SOEP).

The problem with this is that the SOEP largely ignores top incomes in Germany, as it is particularly hard to ensure the participation of such households in surveys.  In contrast, the TPP is based on administrative data from state authorities and as such, it reflects a very different cross-section of the population. Sound statements about changes in the income distribution thus require that the sources of administrative data are examined. These must be checked, either by cross-checking data with information gained from repeated surveys, or at the very least, by means of regular further evaluation of data collected by SOEP, for example.

"Simply analysing the data from surveys, such as that from SOEP, does not provide us with enough information to be able to correctly measure developments in income disparities in Germany. To gain a realistic insight into the income distribution in Germany, we need to access administrative data," explain Professor Andreas Peichl, leader of the ZEW Research group, "International Distribution and Redistribution", and Professor for Quantitative Public Economics at the University of Mannheim, and Dr. Kai Daniel Schmid, leader of the research unit for "Macroeconomy and Income Development" at the IMK.

For enquiries please contact

Professor Andreas Peichl, Phone + 49 )0)621-1235-389, E-mail peichl@zew.de