Technological Innovation and Inclusive Growth in Germany. Bertelsmann Stiftung Inclusive Growth for Germany|18

Economic growth in Germany is no longer as inclusive as it used to be. Between 1990 and 2010 all measures of income and wealth inequality rose considerably,1 which even led the media to portray Germany as a ‘divided nation’.2 Income inequality was relatively low before 1990, and even declined over much of the 20th century, but changed direction after German unification. The rise in income inequality from 1990 onwards is depicted in Figure 1 through various inequality indicators and the ‘at-risk-of-poverty rate’. It can be seen that all measures of income inequality (before and after tax) increased markedly after 1990 along with the ‘at-risk-ofpoverty rate’.3 Felbermayr et al. (2014) furthermore document that the rise in wage inequality was faster in Germany than in the United States, the United Kingdom, and Canada between the mid-1990s and 2010. This rise in income and wage inequality has been accompanied, and to a certain extent occasioned, by a simultaneous increase in wealth inequality. Using data from the Socio-Economic Panel (SOEP), Frick and Grabka (2009) show, that the Gini coefficient for wealth increased from 0.77 to 0.80 during this period, and wealth grew particularly strongly at the top 1 percent of the wealth distribution