Econometric Analyses of Subjective Welfare and Income Inequality

Abstract

There is a manifold of possible ways to analyze the state of the economy of a country and its development over time. Microeconomic approaches based on personal level data can generally help to describe the economic state from the point of view of the country’s residents and economic agents. In a capitalist state, it is most natural to link residents and economic agents to economic mechanisms via a personal level productivity proxy, like monetary income. The overall structure of monetary income in a state can be represented by the size distribution of incomes and its analysis can reveal substantial economic mechanisms to understand the economic system in a state in general. This doctoral thesis is concerned with the analysis of the income distribution in Germany from three different perspectives. The first part of the thesis proposes to exploit data on income satisfaction to construct an evidence-based poverty line. The poverty line is identified by using its assumed unique property to explain income dissatisfaction best among all dichotomizations of income. To this end, several model settings are investigated. Applying the method to data from the SOEP yields a temporally stable poverty line similar to the common 60% definition. Using data from the ECHP, we present further evidence for satisfaction-based poverty lines across Europe and investigate their cross-country differences. The appropriateness of focusing on discrete poverty lines is also investigated. In the second part of the thesis we examine the factors behind rising income inequality in Germany. From 1999 to 2006, Germany experienced an unprecedented rise in net equivalized income inequality and poverty. At the same time, unemployment rose to record levels, part-time and marginal part-time work grew, and there was evidence for a widening distribution of labour incomes. We address the question of which factors were the main drivers of the observed inequality increase. Our results suggest that the largest part of the increase was due to increasing inequality in labour incomes, but that changes in employment outcomes and changes in the tax system also contributed considerable shares. The third part of the thesis seeks answer to the question of how the distribution of income is influenced by the state of the economy, which is important for understanding the economic mechanisms linking micro- and macro-level variables by adapting an empirical approach in order to investigate this relationship. We use a semi-parametric double-index model without restrictions on the shape of the link function between indices of household- and macro-level variables. We conclude that the link function is non-trivial and non-additive, meaning that the influence of macroeconomic conditions (i.e. GDP, inflation, government expenditure or unemployment) is likely to vary with household characteristics. The influence found is small, but in parts significant, drawing a comprehensive picture of potential link-mechanisms.

Es gibt viele Wege, den Stand der Wirtschaft eines Staates zu analysieren und seine Entwicklung zu untersuchen. Mikroökonomische Ansätze, basierend auf Individualdaten können im Allgemeinen helfen, den Stand der Wirtschaft aus dem Sichtpunkt der Bürger und von Wirtschaftsteilnehmern zu untersuchen. In einem kapitalistischen Staat ist der natürlichste Link zwischen den Wirtschaftsteilnehmern und ökonomischen Mechanismen ihr Produktivitätsproxy gemessen an ihrem Einkommen. Den generellen Stand der Einkommen in einem Staat wiederum bildet die Einkommensverteilung auf natürlichem Wege ab. Mit ihrer Hilfe ist es möglich, substanzielle wirtschaftliche Mechanismen des staatlichen ökonomischen Systems zu verstehen. Diese Doktorarbeit befasst sich mit der Analyse der Einkommensverteilung in Deutschland von drei verschiedenen Perspektiven und untersucht dabei Ursachen steigender Ungleichheit von Einkommen, die Lage einer auf subjektiven Informationen beruhender Armutsgrenze und mögliche Zusammenhänge zwischen makroökonomischen Rahmenbedingungen und der Einkommensverteilung.