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Abstract
Frick J. R. and Goebel J. Regional income stratification in unified Germany using a Gini decomposition approach, Regional Studies. Using representative micro data from the German Socio-Economic Panel Study (SOEP), this paper delivers new insights into the development of income inequality and regional stratification in Germany after unification. This paper applies a new method for detecting social stratification by a decomposition of the Gini index that yields the obligatory between- and within-group components as well as an ‘overlapping’ index for the different sub-populations. It is found that East Germany is still a stratum on its own when using post-government income, but since 2001 no longer is when using pre-government income. These results remain stable when using alternatively defined regional classifications. However, there are also indications of some regional variation within West Germany.
Frick J. R. et Goebel J. Les tranches de revenu régional dans l'Allemagne unifiée employant une décomposition Gini, Regional Studies. A partir des données microéconomiques provenant de la Socio-Economic Panel Study (SOEP – enquête permanente socio-économique) menée en Allemagne, cet article cherche à fournir de nouvelles perspectives sur le développement des inégalités de salaire et des tranches de revenu régional en Allemagne au lendemain de l'unification. On applique une nouvelle méthode qui permet de déceler les couches sociales par la décomposition de l'indice Gini qui fournit les nécessairs éléments intragroupe et intergroupe ainsi qu'une indice “chevauchante” pour les différentes sous-catégories de la population. A partir de la dotation globale de fonctionnement, il s'avère que l'est de l'Allemagne reste toujours une couche à part entière mais, depuis 2001, il ne l'est plus quand on considère les ressources propres. A partir d'autres classements régionaux, ces résultats restent inchangés. Cependant, il s'avère une certaine variation régionale dans l'est de l'Allemagne.
Inégalité Décomposition Gini Tranches Unification allemande Ecarts régionaux SOEP
Frick J. R. und Goebel J. Regionale Einkommeusstratifizietung im wiedervereinigten Deutschland mit Hilfe eines Gini-Dekompositionsansatzes, Regional Studies. Mit Hilfe repräsentativer Mikrodaten des sozioökonomischen Panels für Deutschland (SOEP) werden in diesem Beitrag neue Einblicke in das Entstehen eines Einkommensungleichgewichts und einer regionalen Stratifizierung in Deutschland nach der Wiedervereinigung geliefert. Wir nutzen eine neue Methode zur Erkennung von sozialer Stratifizierung mit Hilfe einer Dekomposition des GINI-Indexes, was zu den obligatorischen Komponenten zwischen und innerhalb von Gruppen sowie zu einem, überlappunge-Index für die verschiedenen Subpopulationen führt. Nach unseren Ergebnissen stellt Ostdeutschland weiterhin eine eigenständige Schicht dar, wenn man vom Einkommen unter Berücksichtigung aller staatlichen Transfers (‘post-government income’) ausgeht, hingegen seit 2001 nicht mehr, wenn man das Einkommen ohne diese Transfers (‘pre-government income’) untersucht. Diese Ergebnisse bleiben auch bei Verwendung unterschiedlich definierter regionaler Klassifikationen stabil. Allerdings gibt es auch innerhalb von Westdeutschland Anzeichen einer gewissen regionalen variation.
Dekomposition von Ungleichgewicht Gini Stratifikation Deutsche Wiedervereinigung Regionale Disparitäten SOEP
Frick J. R. y Goebel J. Estratificación de ingresos regionales en la Alemania unificada usando un enfoque de descomposición del índice Gini, Regional Studies. Con ayuda de micro datos representativos de un estudio de panel socioeconómico alemán, en este artículo aportamos nuevas perspectivas sobre el desarrollo de desigualdades de ingresos y estratificación regional en Alemania tras la unificación. Empleamos un nuevo método para detectar la estratificación social mediante una descomposición del índice GINI que produce los componentes obligatorios entre y dentro de los grupos así como un índice de ‘solapamiento’ para las diferentes subpoblaciones. Al analizar los ingresos posgubernamentales observamos que Alemania del este es todavía un estrato en sí pero deja de serlo a partir de 2001 si estudiamos los ingresos pregubernamentales. Estos resultados siguen siendo estables al utilizar clasificaciones regionales definidas de forma alternativa. Sin embargo, también hay indicios de cierta variación regional dentro de Alemania del oeste.
Descomposición de las desigualdades Gini Estratificación Alemania unificada Disparidades regionales Panel socioeconómico alemán
Acknowledgements
The methodological section of this paper benefited substantially from the long-lasting cooperation with Shlomo Yitzhaki and Edna Schechtman within a project funded by the German Israeli Foundation (GIF-Grant I-656-10.4/2000). The paper benefited from comments by Gert G. Wagner, Stephen P. Jenkins, Kurt Geppert and two anonymous referees as well as by participants in the meeting of the International Sociological Association Research Committee 28 (RC28) on Social Stratification and Mobility in Oslo, Norway (5–8 May 2005) and the first conference of the Society for the Study of Economic Inequality (ECINEQ) in Palma de Mallorca, Spain (20–22 July 2005).
Notes
1. For a review of the various approaches to studying regional income convergence, see, for exmaple, Barro and Sala -i-Martin Citation(1995) and Rey and Janikas Citation(2005).
2. in the Appendix presents a selection of economic indicators for 1991 and 2003 across German regions.
3. This additional demand from East Germany actually boosted the West German economy – if only temporarily – postponing the economic slowdown that affected other industrialized countries during the period 1990–91.
4. maps the 16 federal states of Germany into four regions that form the unit of analysis throughout this paper. It should be noted that Berlin is treated here as part of East Germany due to problems of differentiating its eastern and western parts in aggregated statistics.
5. See Lammers Citation(2003) for a discussion of an emerging North–South variation within East Germany.
6. See, for example, Rey and Montouri Citation(1999) for an analysis of regional income convergence of US states using spatial econometrics, explicitly controlling for spatial dependencies such as spill-over effects. Using aggregated income data from various household datasets, Milanovic and Yitzhaki Citation(2002) address global income inequality.
7. A description of this measure can be found in Theil Citation(1967).
8. Dividing the difference between the Ginis for market and disposable income by the Gini coefficient for market income yields a straightforward measure of this process [(G pre – G post)/G pre]. For East Germany, this indicator rose from 0.46 in 1992 to 0.54 in 2003, while the degree of redistribution in West Germany changed only slightly from 0.37 to 0.38, in the same period.
9. See Becker et al. Citation(2002) for a more detailed discussion of the impact of survey characteristics when comparing distribution results based on SOEP with those based on EVS because of the latter's quota sampling design, misrepresentation of foreigners and non-coverage of top-income households.
10. NUTS is the acronym for Nomenclature des unités territoriales statistiques.
11. Based on log GDP per capita information for 110 regions in the EU-12 (applying a mix of NUTS-0, NUTS-1, and NUTS-2), Pittau Citation(2005) identifies a convergence between poorer and richer European regions during the late 1970s and 1980s. In the mid 1990s however, a small group of very rich regions seems to have emerged, mostly large metropolitan areas including the German city-state of Hamburg.
12. This is exemplified by the East German federal state of Sachsen-Anhalt, which comes in 88th (out of 100 regions) in market income inequality, but only third in funds received through redistribution by the tax and transfer system (Mercader-Prats and Levy, 2004, p. 19).
13. See Shorrocks Citation(1984) for a general discussion of inequality decomposition by population subgroups.
14. Spatial dependence in terms of ‘nuisance dependence’ (Rey and Montouri, Citation1999) may be less of concern in this study, given that there is no boundary mismatch between regional organization of the current data and that of the relevant processes constituting the financial equalization between federal states, as described in the next section.
15. See SVR (Citation2004, cipher 628 et seqq.)
16. The basis for this regulation is laid down in Articles 106 and 107 of the German Constitution. See http://www.bundesregierung.de/artikel-,413.45447/Der-Laenderfinanzausgleich-und.htm for more details on the Länderfinanzausgleich. For more information on the Solidarity Pact see http://www.bundesregierung.de/Politikthemen/Aufbau-Ost-,6253/Solidarpakt.htm. In 2005, regulations of Solidarity Pact II came into force, see http://www.bundesregierung.de/Politikthemen/Aufbau-Ost-,1872/Solidarpakt-II.htm.
17. This redistribution process also includes a 6.2 billion euro subsidy by the federal government.
18. Accounting for differences in population size and inflation (as well as West–East purchasing power differences) does not change but in fact accentuates this finding.
19. Note that the relative version of Gini is used here, which is most commonly used in the income distribution literature.
20. All observations of population i are assigned their rank in the overall population and F¯ ui represents the expected value.
21. For a more detailed discussion of between-group inequality and the relation to the overlapping index as well as a more precise description of the alternative specifications of G b , see Frick et al. Citation(2006). See Dickey Citation(2001) for an empirical application to earnings inequality in the UK using the alternative decomposition of the Gini coefficient following Pyatt Citation(1976).
22. Note, however, that for a given distribution i, the upper limit can be lower than 2 (for details, see Schechtman, Citation2005).
23. Note that the indices O ji and O ij are not interrelated by a simple relationship. However, it is clear that the indices of overlapping are not independent.
24. A discussion of the estimation with grouped and weighted data is given in Lerman and Yitzhaki Citation(1989), and for a description of the jackknife estimation, see Yitzhaki Citation(1991) and Frick et al. Citation(2006).
25. Income measures for 1989 and 1990 are not included in this analysis because of the introduction of the common currency on 1 July 1990 and comparability problems of East and West German incomes immediately after unification (Hauser et al., Citation1994).
26. In line with the high share of owner-occupiers in West Germany (2003: 43% of private households), this income component is most relevant in the ‘old’ federal states (approximately 4.5% of post-government income) as opposed to the Eastern part of the country (approximately 3%), where only about one-third of private households live in their own home. However, income inequality results for East and West Germany, as measured by the Gini coefficient, do not vary significantly once imputed rent is excluded from the employed income measure.
27. Referring to the previous section, this implies that G bp is zero as well.
28. All results are available in tabular form on request.
29. Burkhauser et al. Citation(1999) argue that when comparing time trends on inequality measures, one needs to properly consider the state of the business cycle, i.e. one should compare ‘peak to peak’ and ‘trough to trough’ years.
30. In 1992, the East German Gini was 0.3711 as compared with 0.4129 in West Germany. In 2003, the corresponding values were 0.5227 and 0.4584, respectively.
31. The results for the within- and between-group components are perfectly in line with those obtained from conventional inequality decomposition based on general entropy measures. Results are available on request.
32. The impact of the overlapping component on between-group inequality can be seen in in the Appendix, where the maximum between-group inequality G bp is also listed. The figures show that the relation G b /G bp decreases rapidly between 1992 and 1994 and is almost stable thenceforward.
33. In this decomposition for only two groups, this paper refrains from presenting results for the group-by-group overlapping index O ji , given that O i qualitatively resembles O ji . Note that O i is the weighted sum of the group-specific O ji with O ii being equal to one.
34. According to Stewart Citation(2002) between-region variation of the poverty rate in West Germany as measured at NUTS1-level (federal states) is rather low, especially when compared to other large EU countries.
35. For clarity of presentation, none of the figures in this section show results for Germany as a whole, which are given earlier. By definition, these do not change with the number of groups distinguished.
36. Note that the overlapping index for two groups i and j may not be symmetrical (see the previous section).
37. As such, these results provide reason for disappointment among those who wish to see Willy Brandt's message come true: ‘now what belongs together will grow together’ (Original quote: ‘Jetzt wächst zusammen, was zusammen gehört’). Commentary about the fall of the Berlin Wall by Willy Brandt, German chancellor 1969–74 and mayor of Berlin, on 10 November 1989.
38. These findings are perfectly in line with Colavecchio et al. Citation(2005), who analyse GDP per capita at the county level (‘Kreis’, n = 439) derived from aggregated statistics by the Arbeitskreis VGR. They are also able to identify variation within East Germany, however: in 2001 about 80% of Eastern counties still belonged to the poorest of three income categories, while only 8% could be found in the richest category. The results are based on micro-data with a finite number of observations, which cannot deal with such a high level of regional disaggregation.
39. It is not clear at this point to what extent these processes are influenced by regional mobility of East Germans moving to the western part of the country and vice versa – however, given tendency towards selective mobility, this issue may be taken up in a future extension of this paper.