Social Mobility in Germany: New Study Reveals a Steep Decline in Opportunity
Baarck, Bode & Peichl: "Rising Inequality, Declining Mobility: The Evolution of Intergenerational Mobility in Germany" CRC Discussion Paper No. 550
A new discussion paper by Julia Baarck (ifo Institute), Moritz Bode (University of Copenhagen), and Andreas Peichl (ifo Institute, Project A09) challenges long-held perceptions of social mobility in Germany, presenting novel evidence that intergenerational income mobility has substantially decreased over time. Analyzing data from the German Socio-Economic Panel (GSOEP) for child birth cohorts spanning 1968 to 1987, the authors are the first to systematically investigate this trend over an extended timeframe.
The core finding is that intergenerational income persistence—the degree to which a child’s rank in the income distribution is determined by their parents’ rank—began rising sharply for cohorts born in the late 1970s and early 1980s, stabilizing thereafter at a significantly higher level. This persistence is measured using the rank-rank slope (RRS), a positional measure robust to changes in intragenerational inequality. Depending on the specific income definition used, the estimated rank-rank slope increased in magnitude by a substantial 57% to 106% across the observed period.
For the youngest cohorts studied born in the late 1980s, the estimated rank-rank slope is 0.342, a finding that suggests intergenerational income mobility in Germany is at a similar level as in the United States. This contrasts sharply with previous studies that, relying on older cohorts up until the mid-1970s, had concluded that Germany exhibited much higher mobility than the US.
Seeking to understand the mechanisms behind this decline, the authors point to the increasing importance of parental income for children’s educational attainment. They show that the link between parental income and educational outcomes like overall years of education, A-level attainment, and college attainment has increased, and that this increase occurred again for the cohorts born in the late 1970s and early 1980s, that already saw the decrease in income mobility. A potential contributing factor to the stronger link of parental income and educational outcomes is the substantial constraint placed on the need-based student aid scheme (BAföG) during the 1990s, a period when these younger cohorts would have been deciding on higher education.
Furthermore, the decrease in intergenerational mobility mirrors the surge in cross-sectional income inequality among the late 1970s and early 19809s birth cohorts that occurred in Germany during the late 1990s and early 2000s, providing novel evidence for an “Intertemporal Great Gatsby Curve” in Germany. These results indicate that not only did the rungs of the income ladder grow further apart (rising inequality), but a child’s probability of climbing that ladder relative to their parents also worsened (declining mobility).
Link (pdf): Rising Inequality, Declining Mobility: The Evolution of Intergenerational Mobility in Germany
