Income mobility - Some remarks on security and incentive aspects of income mobility, illustrated by an empirical analysis for Germany
The description and explanation of the income of people or households has a long tradition in economics as income and its distribution are seen as a main aspect of the wealth of nations. In this context a lot of research has been done to answer questions such as how the distribution is forming out or what the underlying process is which creates the ditribution, i. e. income mobility.
The relevance of income mobility is manifold. As people are normally risk averse, they are interested in a steady income stream. This can be called the 'security aspect': The lower the mobility, the higher the wealth of people. Another facet of income mobility is the 'incentive aspect'. Upward mobility provides incentives for economic activities as it is possible to be successful and move up the income ladder. Downward mobility on the other hand delivers "sticks" for economic activities.
In most empirical analysis, the time period covered by the data is relatively short and special aspects of the life cycle theory can not be analysed. As we can use data of workers covering their whole working life, we are able to shed some light on the income mobility over their entire employment careers. This will result in more information about the adequacy of some assumptions of the life cycle theory concerning the development of income over time - especially about the invers-U-shape assumption of income profiles.
Autor/enUwe Fachinger; Ralf K. Himmelreicher
Erschienen inWorking Paper 7/2010, Centre for Research on Ageing and Society, Vechta
Letzte Änderung: 17.10.2011