Timm Bönke

Can Households and Welfare States Mitigate Rising Earnings Instability

We compare the evolution of earnings instability in Germany and the United Kingdom, two countries which stand for different types of welfare states. Deploying data from the German Socio‐Economic Panel (SOEP) and the British Household Panel Survey (BHPS), we estimate permanent and transitory variances of male income over the period 1984–2009 and 1991–2006, respectively. Studies in this literature generally use individual labor earnings. To uncover the role of welfare state and households in smoothening earnings shocks, we compute different income concepts ranging from gross earnings to net equivalent household income. We find evidence that the overall inequality of earnings in Germany and the United Kingdom has been rising throughout the period due to both higher permanent earnings inequality and higher earnings volatility. However, taking institutions of the welfare state and risk‐sharing households into account, we find that the volatility of net household income has remained fairly stable. Furthermore, redistribution and risk insurance provided by the welfare state is more pronounced in Germany than in the United Kingdom.

Incomes and Inequality in the Long Run: The Case of German Elderly

Abstract We use German Sample Survey income data to examine the income distribution for elderly individuals during the period from 1978 to 2003. The elderly population, defined as people of age 55 and older, is decomposed by people resident in the Old and New Federal States. Further, we distinguish between persons receiving old-age pensions and persons who do not. Inequality estimates are decomposed by income components, and the bootstrap method is used to test for statistical significance of results.

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

We outline a procedure for unifying various cross sections of the German Sample Survey of Income and Expenditure in a pooled database, and discuss potential pitfalls of such a venture. Particularly, we investigate the consequences of a major break in the survey design for inter-temporal comparability of expenditure distributions: a reduction of the surveying period from twelve to three month taking place between the census years 1993 and 1998. We demonstrate that the shortened survey period impacts the commodity-specific expenditure distributions differently, and that different commodity-specific purchase frequencies are a likely explanation. Moreover, we suggest and empirically assess the suitability of several conversion procedures to ensure comparability of the expenditure distributions before and after the shortening of the surveying period.ZusammenfassungDer vorliegende Beitrag zeigt die Möglichkeiten und Grenzen eines Versuchs, sechs Querschnitte der Einkommens- und Verbrauchsstichprobe (1978 bis 2003) intertemporal vergleichbar aufzubereiten. Insbesondere werden die Effekte eines Bruchs in der Erhebungsmethode auf die in den Querschnitten verzeichneten Ausgabenvariablen untersucht: Während die Daten in den Ausgabenvariablen der Querschnitte 1978 bis 1993 auf Jahresangaben der Befragten beruhen, dienen seit 1998 Quartalsangaben als Datengrundlage. Wir zeigen, dass diese Verkürzung der Befragungsperiode gerade bei unregelmäßig erworbenen dauerhaften Konsumgütern die intertemporale Vergleichbarkeit der Ausgabenvariablen einschränken kann. Aufbauend auf unseren Befunden schlagen wir verschiedene Möglichkeiten zur Harmonisierung vor und überprüfen deren Eignung.

Horizontal equity in the German tax-benefit system: A simulation approach for employees

We analyze the distributive justice of the combined burden of taxes, social security contributions, and public transfers on employee households. Comparing eight different household types, we utilize the concept of horizontal equity regarding the treatment of families in the German tax-benefit system. Applying system-inherent equivalence scales, we find evidence for a structural discrimination against low-income families, while high-income earners tend to be privileged. Therefore, we can state a significant contradiction of value judgments between the social welfare system and the German tax and social security legislation.

The Dynamics of Earnings in Germany: Evidence from Social Security Records

This paper uncovers ongoing trends in idiosyncratic earnings volatility across generations by decomposing residual earnings auto-covariances into a permanent and a transitory component. We employ data on complete earnings life cycles for prime age men born 1935 through 1974 that covers earnings between 1960 and 2009. Over this period, the German labor market undergoes a heavy transformation and experiences strong deregulation, deunionization and a shift in employment from the industrial to the service sector. Our findings of increases in both components reflect the distinct phases of this transformation process. In magnitude, the transitory component increases most strongly in the early 1970s and the 1990s for young workers, whereas the permanent component displays the strongest increases for older workers in the early 1980 and the 2000s. Thus, the changes complicate the labor market entry for young workers while widening wage differences for established workers.

Fiscal Federalism and Tax Administration -- Evidence From Germany

In many federations, fiscal equalization schemes soften fiscal imbalances across the member states. Such schemes usually imply that the member states internalize only a small fraction of the additional tax revenue from an expansion of the state-specific tax bases, while the remainder of the additional tax revenue is redistributed horizontally or vertically. We address the question as to which extent state-level jurisdictions in such a federation underexploit their tax bases. By means of a stylized model we show that the state authorities in such a federation have incentives to align the effective tax rates of their residents to the internalized fraction of marginal tax revenue. We empirically test the model using three setups: one state level exercise and two micro level exercises using administrative income-tax data in form of an OLS regression and a natural-experiments design. All setups support the results from our theoretical model.

Country Inequality Rankings and Conversion Schemes

Two conversion schemes may be employed for assessing 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.

Erbschaft und Eigenleistung im Vermögen der Deutschen: Eine Verteilungsanalyse

Wir gehen der Frage nach, ob die gegenwartige Vermogensungleichheit in Deutschland auf eine Dominanz von Erbschaften im oberen Bereich der Verteilung zuruckzufuhren ist. Auf Basis der PHF-Daten finden wir, dass die Vermogen der Deutschen zu etwa zwei Dritteln auf Eigenleistung und zu etwa einem Drittel auf Erbschaft zuruckgehen. Diese Proportion verandert sich entlang der Vermogensverteilung wenig. Insbesondere nimmt die relative Bedeutung von Erbschaften mit zunehmendem Privatvermogen nicht systematisch zu. Diese Ergebnisse sind robust hinsichtlich unterschiedlicher Altersgruppen, Vermogensdefinitionen und Kapitalisierungsmethoden fur die unteren 99 %.

Tragen ältere Menschen ein erhöhtes Armutsrisiko? Eine Dekompositions- und Mobilitätsanalyse relativer Einkommensarmut für das wiedervereinigte Deutschland

In diesem Beitrag wird die Entwicklung relativer Einkommensaltersarmut seit der deutschen Wiedervereinigung bis zum Jahr 2010 untersucht. Dies geschieht sowohl in Quer- als auch in Längsschnittperspektive. Die Ergebnisse der Analysen geigen, dass das Altersarmutsrisiko in Deutschland inzwischen geringer ist als andere Armutsrisiken – etwa als jenes der jüngsten Altersgruppen. Allerdings ist seit 2007 auch das relative Altersarmutsrisiko wieder gewachsen, und zwar weitgehend parallel zur allgemeinen Armutsrisikoerhöhung. Hinzu kommt seitdem ein Anstieg der Wahrscheinlichkeit, in Altersarmut zu verbleiben.

Effectiveness of Early Retirement Disincentives: Individual Welfare, Distributional and Fiscal Implications

In aging societies, information on how to reform pension systems is essential to policy makers. This study scrutinizes effects of early retirement disincentives on retirement behavior, individual welfare, pensions and public budget. We employ administrative pension data and a detailed model of the German tax and social security system to estimate a structural dynamic retirement model. We find that retirement behavior is strongly influenced by the level of disincentives. Further, disincentives come at the cost of increasing inequality and individual welfare losses. Still, net public returns are about three times as high as monetarized individual welfare losses. Our estimates also suggest that similar levels of net public returns, if achieved by indiscriminating pension cuts, are associated with individual welfare losses that are more than twice as high.