Document Type

Working Paper






Income Security Policy Series


Richard Hauser


Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy


We use cross-sectional and longitudinal data from Germany (Socio-Economic Panel) and the United States (Panel Study on Income Dynamics) to show how the income distribution changed over the 1980s business cycle in these two countries. Consistent with other researchers we find income inequality in the United States increased over the peak years of the 1980s business cycle and that the middle of the income distribution shrank. However, we also find that the great bulk of the disappearing middle shifted to the right— became richer— over the period. Hence, it was disproportionate gains from growth rather than the “immiseration” of the middle class that explains the rise in inequality over the period. Focusing on the upswing years of the 1980s business cycle, we find that cross-sectional comparisons understate the gains to persons who lived in working-age households over the period. This is especially true of persons who were living in nonworking households at the start of the period. We find similar results for Germany. However, regardless of the data used, the distribution of the fruits of economic growth during the 1980s were more evenly distributed in Germany than in the United States. Economic gains by persons living in nonworking households and in households headed by relatively low educated workers in Germany were much closer to the gains of other working age households than was true in the United States.


1061 1843

Additional Information

Policy studies paper no.18


Local Input

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.