INEQUALITY  |  BASIC PAPERS

Income, consumption and wealth inequality in Germany: Three concepts, three stories?

by Charlotte Bartels & Carsten Schroeder

PUBLISHED

1. APRIL 2020

Abstract

Given how controversially inequality is still being discussed by both academics and policy makers in Germany, we discuss methodological issues related to the measurement of inequalities and review the literature. One important issue is the choice of the measure of well-being: the central measures discussed are household equivalent disposable income, household consumption, and household wealth. Subsequently we use the Income and Expenditure Survey (Einkommens- und Verbrauchsstichprobe (EVS)) for Germany since 1993 to compare inequality across income, consumption, and wealth. Generally, we find that these three concepts tell different stories about the level of inequality and its intertemporal pattern. In line with theoretical arguments and previous empirical evidence, wealth is more unequally distributed than income and income more unequally than consumption.

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The rising gap between rich and poor has become a threat to social cohesion in most rich countries. To reverse this trend it will be crucial to better understand the importance of different drivers of income and wealth inequality.

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