Income Mobility in International Comparison - an Empirical Analysis with Panel Data

This paper compares the mobility of gross individual labor income, gross equivalent income and net equivalent labor income in the western and eastern states of Germany, in Great Britain, in the USA and in Hungary using panel data of these countries from the period 1989-1995. For every income concept, mobility in East Germany is initially much higher than in West Germany, but converges to the West German level over time. Mobility of gross equivalent income is higher and mobility of net equivalent labor income is lower in West Germany than in Great Britain. Mobility of gross individual and of gross equivalent income is higher and mobility of net equivalent labor income is lower in West Germany than in the US. Mobility of net equivalent income is much higher in Hungary than in East Germany. The results show a unexpectedly high labor market flexibility in Germany compared to Great Britain and the US. However, escaping unemployment is harder in Germany than in Great Britain and the US where unemployed persons manage to get low paid jobs quickly. Moreover, the largest reduction of gross equivalent income mobility by the tax and transfer system is observed in Germany.