INEQUALITY  |  WORKING PAPERS

Inequality in Germany – Policy measures to reverse the trend

by Stefan Bach, Markus M. Grabka and Marc C. Adam

PUBLISHED

13. DECEMBER 2021

Abstract

We review income and wealth inequality in Germany and its trends. We hierarchize its drivers and derive possible options for policy makers. A focus should be placed on reforming the labour market, reforming the tax and transfer system and taxing capital income or wealth to target the underlying inequality, which contributes significantly to the increase in inequality of net household incomes. Targeting wealth inequality should follow a double-sided strategy by promoting private wealth accumulation and redistribution through taxation of high income and wealth. Relevant options include a reform of the inheritance tax, the extra revenue could be used to finance a universal capital endowment.

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ABOUT INEQUALITY

KNOWLEDGE BASE

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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