The Distribution of Income of Self-employed, Entrepreneurs and Professions as Revealed from Micro Income Tax Statistics in Germany

Merz: The Distribution of Income of Self-employed, Entrepreneurs and Professions

Table 5:

Net income = individual taxable income minus fixed income tax (yearly)

All working =   employees and self-employed (entrepreneurs and professions*);

not included: income predominant from capital assets, let and lease, other sources
Self-employed are divided in

entrepreneurs (with profit income from agriculture and forestry and from trading) and in
professions* here as the independent (the number of independent persons are by far
dominated by the number of professions (Freie Berufe)

Source: Income Tax Statistic 1992, Sample of Individual Incomes and Taxes,

Federal Statistical Office 1999, 1995; Own calculations

Though the group of entrepreneurs show the most inequal distribution with the highest
group specific Theil index, when the inequality contribution is weighted by the
respective population and income share (wg), the highest inequality share with 61% is
contributed by the group of employees followed by the entrepreneurs.

To further illustrate the 'ingredients' of the group weighting the last two columns of
Table 5 show the population share (%) as the respective population part of the total
population⁷ and the income share (%) as the income part of the total sum of income.

The self-employed, with their groups of entrepreneurs and professions*, is the only
group whose inequality share is larger than its population share. Thus, the self-
employed contribute more to the overall inequality than they contribute to the
population number. The very importance in 'explaining’ overall inequality by the group
of entrepreneurs partly can be explained by their members: besides persons with
predominant income from trading (mean taxable income of 101.172, see Table 2), the
second group of the entrepreneurs, farmers, show a much lower income (mean taxable
income of 37.096 DM, see Table 2); together with their different group homogeneity
this will be the particular reason for the income heterogeneity of the entrepreneurs.

By the income share column we see that the self-employed with 7,8% of the working
population yield 14,3% of total net income. The most gap between these shares is given
for the professions with 1,6% of all working people yielding almost 4% of total net
income.

⁷ All individual microdata are weighted by sample weights to achieve representative results; thus, the total population
is the sum of all sample weights.

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