Inequality of the Distribution of Personal Wealth in Germany 1973 – 1998

Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. 1. INTRODUCTION In their comprehensive survey of the distribution of wealth Davies and Shorrocks 1 describe some stylized facts about personal wealth holdings known for various countries: (1) The distribution of wealth is more unequal than that of income, and has a long upper tail. (2) Many households never accumulate much private wealth, even in rich countries. (3) Wealth inequality has been on a downward trend for most of the past century but with interruptions and reversals. (4) Financial assets are less unequally distributed than non-financial assets, at least when owner-occupied housing is the major component of non-financial assets. (5) The distribution of inherited wealth is much more unequal than that of wealth in general. (6) The age-wealth pattern is much less pronounced than predicted by the life cycle hypothesis. 2 In this survey information about the distribution of wealth in Germany is very scarce. 3 Davies and Shorrocks neglected some earlier studies written in German, presumably because of language problems. 4 Our paper presents cross-section results for the period from 1973 to 1998 based on the The paper by Burkhauser et al. (1997) is based on the German Socioeconomic Panel (GSOEP). There are methodological differences with respect to the analysis of the concentration of wealth between the Burkhauser et al. paper and our study. The most important differences are: (1) Burkhauser et al. use persons as the units of measurement. To derive Gini coefficients for disposable wealth of persons household wealth is divided by the sum of the weights of the household members based on the original OECD equivalence scale. We use either the household or persons as units of measurement. If persons are used household wealth is divided by the number of members without weighting. (2) Burkhauser et al. calculate the Gini coefficient and the quintile shares based on a ranking according to the net equivalent income of each person. Persons with zero or negative income are excluded. Our ranking is based on disposable …