Top Incomes in Germany, 1871–2014

Abstract

This study provides new evidence on top income shares in Germany from industrialization to the present. Income concentration was high in the nineteenth century, dropped sharply after WWI and during the hyperinflation years of the 1920s, then increased rapidly throughout the Nazi period beginning in the 1930s. Following the end of WWII, German top income shares returned to 1920s levels. The German pattern stands in contrast to developments in France, the United Kingdom, and the United States, where WWII brought a sizeable and lasting reduction in top income shares. Since the turn of the millennium, income concentration in Germany has been on the rise and is today among the highest in Europe. The capital share is consistently positively associated with income concentration, whereas growth, technological change, trade, unions, and top tax rates are positively associated in some periods and negative in others.

The Political Economy of the Prussian Three-Class Franchise

“…Thus, the rise of industry created an unforeseen regional concentration of high incomes and thereby a higher level of vote inequality in industrializing regions while vote inequality in agricultural regions was less affected. This description is in line with the developments first observed by Kuznets (1955) who also relied on Prussian income data (also, see Grant 2002;Bartels 2019).…”

“…The rise of large-scale industry in late nineteenth-century Prussia increased earnings and tax contributions of industrialists. This development resulted in a stronger income dispersion and therefore in higher vote inequality in industrial regions (Kuznets 1955;Bartels 2019) than in agricultural regions where the income of landowners remained largely unchanged. As a consequence, the highly unequal distribution of individuals across voting classes in industrial regions created a small and homogeneous first class, which was able to coordinate on electoral delegates during primary elections (Urwahlen) and to influence the selection of their favorite MP, who would support liberal policies, as our results show.…”

“…Large landowners paid a sufficient amount of taxes to populate the first two classes, despite the fact that they enjoyed a range of tax exemptions and paid little taxes on land-their main source of income. Due to the rapid rise of large-scale industry in the second half of the century, industrialists started to obtain high returns to capital investment and incurred an increasing share of the total tax base (Bartels 2019). In industrializing regions, this development lifted the new industrial elites into the first two classes, where they crowded out parts of the traditional elites.…”

Inequality in turbulent times: income distribution in Germany and Britain, 1900–50

“…Results are also in line with the updated top income series for Germany provided by Bartels, ‘Top incomes’.…”

Weber Revisited: The Protestant Ethic and the Spirit of Nationalism

“…Finally, we contribute to the literature on the long-run economic development of Germany (Broadberry and Burhop 2007;Grant 2005;Wolf 2009;Hornung 2015;Bartels 2019). We document that the German Empire was characterized by fragmentation between religious groups, between different ethnic groups, territories with different historical legacies, a growing rural-urban divide, and growing economic inequality.…”