In Germany, two observations can be tracked over the past 15 to 20 years: First, income inequality has constantly increased while, second, the average household size has been declining dramatically. The analysis of income distribution relies on equivalence-weighted incomes, which take into account household size. Therefore, there is an obvious link between these two developments. The aim of the paper is to quantify how the trend towards smaller households has influenced the change in income inequality. It appears that inequality would also have increased without this demographic trend. But its level would be noticeably lower than it actually is.
Demography income inequality inequality decomposition household structure SOEP Germany