Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236388 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14357
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
After an economically tough start into the new millennium, Germany experienced an unprecedented employment boom after 2005 only stopped by the COVID-19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid- or high-income range or that other developments offset the effects of the drastically improved labour market conditions. The present paper solves this puzzle by breaking down the observed changes in the distribution of disposable incomes between 2005/06 and 2015/16 into the contributions of eight different factors, one of them being the employment boom. Our results suggest that, while the latter did have an equalising impact, it was partially offset by the disequalising impact of other factors and substantially dampened by the tax and transfer system. Our results point to a strong role of the German tax and transfer system as a distributional stabilizer implying that, if the COVID-19 shock were to persistently reverse all the employment gains that occurred during the boom, this would only have a moderately disequalising effect on the distribution of net incomes.
Subjects: 
income distribution
employment
social insurance
labour market reform
JEL: 
C14
D31
I30
Document Type: 
Working Paper

Files in This Item:
File
Size
585.59 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.