On average, incomes in municipalities in western Germany are less equally distributed than in eastern Germany. Moreover, there are also differences between different cities. Inequality is most pronounced in municipalities in Baden-Württemberg and least pronounced in Thuringia. For example, in Erfurt (TH), the top 10 percent of taxpayers have a 35 percent share of total income. In Heilbronn (BW), by contrast, the top 10 percent earned almost 60 percent of total income. “Compared to other countries, inequality between regions in Germany is currently rather moderate, but the degree of inequality within cities and municipalities is growing,” says ifo researcher Paul Schüle.
Peichl and Schüle explain that, from this perspective, government measures such as fiscal equalization between federal states or regional policy aimed at strengthening structurally weak regions would not have a significant impact on income inequality. This is because such measures would directly affect only the very small proportion of income inequality in Germany that results from income differences between regions. To ensure that gross incomes in Germany do not diverge further, policymakers ought to consider instruments other than location-based measures.
