Rising income inequality inhibits consumer demand: five questions for Ferdinand Fichtner

Mr. Fichtner, DIW Berlin examined the relationship between rising income inequality and economic growth. Would Germany have higher growth if income inequality had not risen in recent years?

Yes, Germany’s economic growth would actually have been somewhat higher if income inequality had not sharply increased between 1991 and 2015. The German economy showed an unre - alized growth potential of around two percentage points due to the rise in income inequality in the period under inspection (1991 to 2015). This corresponds to a good one-twentieth of a percentage point of a lost growth per year. [...]