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

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8 Conclusions

Having the opportunity to use a large actual administrative microdata sample within the
Federal Statistical Office we were able to analyze for the first time in Germany the
income distribution of the self-employed compared to the employees and to deepen the
microanalysis for the group of professions on a sound base. This sample of tax payers,
the German Income Tax Statistic 1992 is an outstanding statistic and microdata base,
because it allows the individual determination of the ‘real’ income and tax situation for
the self-employed in particular.

After having discussed the institutional particularities of the income tax statsistic with
emphasis to the self-employed, we first quantified the importance of our data base
within the overall German income and tax situation. Based on the income and tax
sample with finally more than 80.000 individual taxpayers, we then compared the
inequality pattern of employees, and self-employed with its entrepreneurs and
professions*. We could even quantify the income situation for the relative small but
important group of professions with reliable results not only for the professions overall
but also for the important 14 single subgroups of professions.

Our analyses encompass a variety of central inequality measure to analyze the net (after
tax) income distribution, an analysis of the redistributional impacts of the German tax
system and the decomposition of the respective overall inequality by the generalized
entropy decomposable Theil index.

There are a lot of single interesting results discussed and presented by our tables. To be
brief with our conclusion and to answer the question from the beginning of the single
professions’ chapter: there is by no means a typical income distribution of 'the'
professions (and 'the' self-employed) showing more or less homogeneous concentration
on higher income. In addition, a (existing) discussion of the income situation by
measures of the income level only, like the mean value, is a misleading discussion
concerning the actual income situation of the professions. First, as we have seen there is
a widespread of mean income between the different single professions with quantitative
important groups having low professional (though predominant) income. Second, the
single distributions of subgroups of professions show a very heterogeneous picture,
where only some distinct professions are ‘responsible’ for the overall inequality
measured by the inequality shares. Nevertheless, dominant is the within group effect for
all the professions; the connected low between group inequality importance shows that
a certain professional occupational status is not the overall driving factor in ‘explaining’
the professions overall inequality: it is the distribution within the single occupational
subgroups.

The last result can even be generalized for the all working people: remarkable is the
striking evidence of a low between group inequality (only 6%) when decomposed the
all working people to the employees, entrepreneurs and professions*. This quantified
result is in contrast to an opinion, that the occcupational status, in particular the status
being an employee or a self-employed person, is related to a certain income range. This
is obviously far less important compared to the within group inequality to ‘explain’
income inequality in the re-unified Germany.



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