For Specialists
Wealth simulator - Background and Methodology
How much do income and wealth drift apart? What are the drivers? And what is the best way to stop and reverse excessive trends? There has long been a dispute about this, even among academics. In a project lasting several years, the Forum New Economy, together with leading international and national experts on inequality, is trying to find reliable answers to these questions - on the basis of increasingly better data and broader knowledge beyond often politically emotional disputes. After a first phase with three studies, in which the focus was on the status of data and findings as well as a hierarchisation of the causes of inequality, the aim now is to gain a better understanding of the possible instruments for reducing wealth inequality.
To this end, we have commissioned a group of researchers led by Timm Bönke and Charlotte Bartels to develop a simulation model in an intensive steering process, with which it is possible to estimate what a wealth tax or starting capital for young people would actually change about the distribution of wealth in Germany over a period of up to ten years. You can read about the technical assumptions behind these models in the paper below.
The project was supported by the Robert Bosch Stiftung.
How the simulator is set up and works
For the simulation, five typically discussed wealth policy instruments were compared in a micro-simulation model in terms of their distributional impact. The model calculates the extent to which an instrument such as a wealth tax changes the amount of wealth per household. The model also simulates how households respond to policies in terms of their behaviour - and how additional wealth is created through savings behaviour or inheritance. Employment profiles are also modelled and households are differentiated according to demographic characteristics.
The model is based on the results of household surveys conducted by the German Institute for Economic Research (DIW Berlin).
Previous Forum New Economy Papers on Inequality
Fratzscher, M. (2018) Myths and Facts About Inequality. Intereconomics.
Charlotte Bartels & Carsten Schröder (2020a). Income, consumption and wealth inequality in Germany: Three concepts, three stories?
Charlotte Bartels & Carsten Schröder (2020b). The role of rental income, real estate and rents for inequality in Germany.
Stefan Bach, Markus Grabka & Marc Adam (2021). Ungleichheit in Deutschland – Politikmaßnahmen zur Trendumkehr.