The Decomposition of Well-Being Categories - An Application to Germany

Abstract

In the paper, a combined approach is used to test for inequality differences of several well-being categories for a number of groups of persons. Hereby, total inequality is decomposed into within- and into between-group/category inequality (via a normalised coefficient of variation as the used inequality indicator). The decompositions are categorised into those referring to socio-demographic characteristics (age, sex, nationality, place of residence, household type) and those belonging to different well-being (sub-)categories (several income, wealth, and expenditure categories). Based on the methodical setting, empirical analyses are performed for Germany using the 2008 German Sample Survey of Income and Expenditure (Einkommens- und Verbrauchsstichprobe; EVS) as the database. Out of our numerous findings for both kinds of decomposition, the overwhelming role of within-group/category inequality becomes evident. By decomposing German (material) well-being inequality in great detail, we shed light on its dimensions, showing that decomposition by income, wealth, and expenditure, as well as by socio-demographic characteristics is important to obtain adequate solutions for socio-political measures.