Country Inequality Rankings and Conversion Schemes

Two conversion schemes are usually employed for assessing personal-income inequality from household equivalent incomes: to weight household units by size or by needs.Using data from the Luxembourg Income Study, we show the sensitivity of country inequality rankings to conversion schemes and explain the finding by means of inequality decomposition. A bootstrap approach is implemented to test for statistical significance of our results.inequality, equivalence scale, equivalent income, weighting scheme,decomposition

The German spatial poverty divide: poorly endowed or bad luck?

We study inter-temporal changes in poverty for Germany from year 1978 to 2003, and we employ the bootstrap method to test for statistical significance of results. All results are decomposed by household type and region. Poverty estimates are particularly high for single parents. Most striking, however, is the poverty divide between the old and newly-formed German Federal States, with poverty being significantly higher in the latter. We conduct a nonlinear Oaxaca-Blinder decomposition to quantify the separate contribution of regional differences in households’ characteristics to the probability of being poor.Poverty, decomposition, expenditure patterns, necessities, Oaxaca-Blinder decomposition, bootstrap, equivalence scale.

Equivalence scales reconsidered: an empirical investigation

Income-expenditure surveys typically provide incomes on the household level. As households can differ in size and needs, a reliable assessment of inequality in living standards, therefore, necessitates the conversion of the original heterogeneous into an artificial quasi-homogeneous population. Ebert and Moyes (2003) and Shorrocks (2004) theoretically explore the properties of two alternative conversion strategies: a weighting of household equivalent incomes by size and by needs. We use data from the Luxembourg Income Study for examining the sensitivity of the Gini and the Theil index to the chosen conversion strategy, and explain our results by means of an inequality decomposition by population subgroups. --income distribution,inequality,inequality decomposition,equivalence scale

Equivalence scales reconsidered – an empirical investigation

Households can differ in size and needs. A reliable assessment of inequality in living standards, therefore, necessitates the conversion of the original heterogeneous into an artificial quasi-homogeneous population. Ebert and Moyes (2003) and Shorrocks (2004) theoretically explore the properties of two conversion strategies, i.e., to calculate household equivalent incomes and then to weight household units by their size vs. their needs. We use data from the Luxembourg Income Study for examining the sensitivity of the Gini and the Theil index to the chosen conversion strategy, and explain our results by means of an inequality decomposition by household types. Country inequality rankings are sensitive to the conversion strategy applied. The decomposition analysis reveals the underlying mechanisms. We find inequality estimates typically to be lower in the size-weighted distribution compared to needs-weighting. This is driven by relatively higher weights of large household units in case of size weighting in combination with inequality being typically below average among households with children.income distribution, inequality, inequality decomposition, equivalence scale.

Poverty in Germany: Statistical Inference and Decomposition

Based on six harmonized cross-sections of the German Sample Survey of Income and Expenditure, we study inter-temporal changes in poverty from year 1978 to 2003. Results are decomposed by region and household types, and the bootstrap method is applied to test for the statistical significance of all our findings. Across household types, single parents with children have the highest poverty risk. Most striking is a huge regional divide in poverty which only narrows slightly over the period under investigation: the incidence and the intensity of poverty are substantially higher in the New states. A nonlinear Oaxaca-Blinder decomposition is conducted to quantify the separate contribution of regional differences in households' characteristics to the likelihood of being poor. Estimates from the decomposition indicate that differences in the distributions of socioeconomic characteristics play a negligible role for the 1993 poverty divide. Already in year 2003, however, differences in the distributions of characteristics explain more than fifty percent of the poverty divide, indicating that the poverty divide is likely to become a persistent phenomenon.poverty, Oaxaca-Blinder decomposition, bootstrap, equivalence scale

The German spatial poverty divide: poorly endowed or bad luck?

We study inter-temporal changes in poverty for Germany from year 1978 to 2003, and we employ the bootstrap method to test for statistical significance of results. All results are decomposed by household type and region. Poverty estimates are particularly high for single parents. Most striking, however, is the poverty divide between the old and newly-formed German Federal States, with poverty being significantly higher in the latter. We conduct a nonlinear Oaxaca-Blinder decomposition to quantify the separate contribution of regional differences in households' characteristics to the probability of being poor. --Poverty,decomposition,expenditure patterns,necessities,Oaxaca-Blinder decomposition,bootstrap,equivalence scale

Incomes and inequality in the long run: the case of German elderly

We employ German Sample Survey Income data to examine income inequality and the financial situation of elderly citizens for the period from 1978 to 2003, focussing on differences between retired and non-retired elderly and between elderly with residence in the Old and the New German Laender. Inter-temporal changes in income inequality are also decomposed by income sources. To our knowledge, this is the first study that provides comparable and detailed longitudinal income statistics for the German elderly. We find some remarkable inter-temporal patterns. First, the financial situation of the elderly has improved substantially over time. This is true especially for the New Laender, although elderly with residence in the Old Laender remain financially privileged. Within the same age cohort, we also find that non-retired, on average, are financially better-off compared to retired elderly. For reunified Germany, inequality is astonishingly stable over time, but rises significantly since 1993 in the New German Laender. --Pensioner,Inequality,Inequality Decomposition,German Sample Survey Income data

Compiling a harmonized database from Germany's 1978 to 2003 sample surveys of income and expenditure

We outline a procedure for combining six cross-sections of the German Sample Survey of Income and Expenditure, and discuss potential pitfalls of such a venture. Particularly, we investigate the consequences of a major break in the survey design for inter-temporal comparisons of expenditure categories: a reduction of the surveying period from twelve to three month taking place between the census years 1993 and 1998. We demonstrate that for several commodities a division-by-four of annually-surveyed expenses cannot guarantee inter-temporal comparability of expenditure distributions. We suggest and test the performance of several alternative conversion procedures. Suitability of conversion strategies hinges upon good-specific purchase properties. --German Sample Survey of Income and Expenditure,annual vs. trimestrial data

Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany

Under cooperative federalism, when an identical tax tariff applies to all regions of a federation, usually redistribution rules are implemented to smooth fiscal differences. The administration of tax collection, however, is sometimes delegated to the regional level, leaving the regional administrations some discretion concerning the auditing of tax returns. Building on a stylized model, we show that under such conditions granted discretionary tax deductions at the level of tax units is positively related to state-specific marginal rates of loss (MRL), i.e., the fraction of an additional tax Euro raised in a region that the fiscal-equalization system redistributes to other jurisdictions. We empirically test the model's presumption using administrative income-tax micro data from Germany. Regression estimates comply with the implications of our model. --Fiscal federalism,rate of loss,income tax returns

Incomes and inequality in the long run: the case of German elderly

We employ German Sample Survey Income data to examine income inequality and the financial situation of elderly citizens for the period from 1978 to 2003, focussing on differences between retired and non-retired elderly and between elderly with residence in the Old and the New German Laender. Inter-temporal changes in income inequality are also decomposed by income sources. To our knowledge, this is the first study that provides comparable and detailed longitudinal income statistics for the German elderly. We find some remarkable inter-temporal patterns. First, the financial situation of the elderly has improved substantially over time. This is true especially for the New Laender, although elderly with residence in the Old Laender remain financially privileged. Within the same age cohort, we also find that non-retired, on average, are financially better-off compared to retired elderly. For reunified Germany, inequality is astonishingly stable over time, but rises significantly since 1993 in the New German Laender. --Pensioner,Inequality,Inequality Decomposition,German Sample Survey Income data