What Accounts for High Incomes of Self-Employed Persons? - A Microanalysis Based on the German Socio-Economic Panel

FFB Discussion Paper No. 44

31 Pages Posted: 21 May 2009

See all articles by Dierk Hirschel

Dierk Hirschel

affiliation not provided to SSRN

Joachim Merz

Research Institute on Professions; Research Institute on Professions; Leuphana University of Lueneburg; Institute for the Study of Labor (IZA)

Date Written: January 1, 2004

Abstract

The legitimacy of inequality concerning the income distribution in market economies is based on the assumption of a dominant individual performance and the assumed existence of equal chances. To test the empirical relevance of this assumption requires the analysis of the determinants of the income level as well of income mobility. Whereas the scientific discussion traditionally is centered on the lower income range and poverty, the upper range of the income distribution with high income is rarely investigated. This is valid the more the self-employed are regarded.

The term study is analyzing the determinants of high working income of the self-employed (200% of mean as the wealth line) in Germany. We distinguish between individual (human capital, working hours) and structural (social origin, discrimination, region etc.) determinants of the income level. Theoretical background are the prominent income theories. Microdatabase is the socio-economic panel (SOEP).

With multivariate panel econometric approaches (Probit- and Tobit panel model) the single hypotheses are tested. Central result: high income is above all a question of social origin. The social background influences via education and social networks the level of working income. Individual factors compared to the structural influences are rather of lesser importance in determining high income of the self-employed.

Note: Downloadable document is in German.

Keywords: wealth and income distribution, high working income, self-employed, social background, discrimination, human capital, job performance, GSOEP, theory of justice.

JEL Classification: I30, I31, J23

Suggested Citation

Hirschel, Dierk and Merz, Joachim and Merz, Joachim, What Accounts for High Incomes of Self-Employed Persons? - A Microanalysis Based on the German Socio-Economic Panel (January 1, 2004). FFB Discussion Paper No. 44, Available at SSRN: https://ssrn.com/abstract=1407451 or http://dx.doi.org/10.2139/ssrn.1407451

Dierk Hirschel

affiliation not provided to SSRN

Joachim Merz (Contact Author)

Research Institute on Professions ( email )

Lüneburg
Germany

Research Institute on Professions ( email )

Lüneburg
Germany

Leuphana University of Lueneburg

Scharnhorststrasse 1
Lüneburg, 21314
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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