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Sources of Inequality in Italy

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  • Roberto Iacono

    (Norwegian University of Science and Technology, Norway)

  • Marco Ranaldi

    (PSE and University Paris 1 Panthéon-Sorbonne, France)

Abstract

In this article, we study the link between the functional and personal distribution of income, focusing on the case of Italy between 1989 and 2016. To this end, we rely on the novel concept of income composition inequality. Income composition inequality focuses on how unequally the composition of income is distributed across the population. The higher the overall degree of income composition inequality is, the stronger the link between the functional and personal distribution of income. We show that the strength of this link decreased steadily in Italy over the period considered. This result is robust to the use of different definitions of capital and labor and different estimation techniques of the degree of income composition inequality. The implications of this result are twofold. First, fluctuations in the total factor shares of income are having an increasingly weaker impact on income inequality in Italy. Second, Italy is moving towards becoming a multiple sources of income society. Finally, we conceptualize a simple rule of thumb for policy makers seeking to reduce income inequality in the long run: This rule relates fluctuations in the total factor shares and the level of income composition inequality to the specific income source to be redistributed.

Suggested Citation

  • Roberto Iacono & Marco Ranaldi, 2018. "Sources of Inequality in Italy," Working Papers 479, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2018-479
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    1. Ranaldi, Marco & Milanović, Branko, 2022. "Capitalist systems and income inequality," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 20-32.
    2. Marco Ranaldi, 2022. "Income Composition Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 139-160, March.
    3. Roberto Iacono & Elisa Palagi, 2020. "Still the lands of equality? On the heterogeneity of individual factor income shares in the Nordics," LEM Papers Series 2020/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Ranaldi, Marco, 2021. "Global Distributions of Capital and Labor Incomes: Capitalization of the Global Middle Class," SocArXiv 3g59r, Center for Open Science.
    5. , Stone Center & Ranaldi, Marco, 2020. "Distributional Aspects of Economic Systems," SocArXiv n7wj4, Center for Open Science.
    6. Arsen Palestini & Giuseppe Pignataro, 2023. "Inequality assessment in a dynamic framework with heterogenous agents," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(2), pages 469-494, July.
    7. Petrova, Bilyana & Ranaldi, Marco, 2021. "Determinants of Income Composition Inequality," SocArXiv vyrz7, Center for Open Science.

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    More about this item

    Keywords

    Income composition inequality; functional and personal income distribution; Italy.;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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