Similar to many other OECD countries, income inequality in Germany has increased over the past decades. However, it is not yet clear to what extent there has actually been a decline at the household level. Our study therefore examines what is behind the increased income inequality: increases or decreases of household incomes or a change in the composition of the population. Using SOEP data from 1995-2015 and hybrid panel regressions, we show that income inequality increases between different educational groups and EGP-classes, as well as between migrants and Germans.
Furthermore, we show that the increasing income inequality at the household level cannot be attributed solely to a change in the composition of the population, but that disadvantaged households have experienced lower increases in disposable household income over time than other households.
These findings suggest that hopes of upward income mobility are increasingly disappointed among the more disadvantaged population groups in recent years.
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