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Does Consumption Inequality Track Income Inequality in Italy?

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Abstract

This paper presents stylized facts on labor supply, income, consumption, wealth, and several measures of consumption and income inequality drawn from the 1980-2006 Survey of Household Income and Wealth (SHIW)conducted by the Bank of Italy. The SHIW provides information on consumption, income and wealth, and a sizable panel component that allows econometricians to estimate sophisticated income, consumption, and wealth processes and to analyze labor market and portfolio transitions. Given the population changes associated with the demographic transition and Italian policy reforms since the mid 1980s, the survey information provide a level playing field from which to analyze macroeconomic policy shifts and structural reforms based on microeconomic data. We find that over the sample period income inequality is higher and has grown faster than consumption inequality. The labor market reforms of the 1990s are the most plausible explanation for the rise in income inequality.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 229.

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Date of creation: 16 May 2009
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Publication status: published in Review of Economic Dynamics, January 2010, vol. 13, 133-153.
Handle: RePEc:sef:csefwp:229

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  1. Luigi Pistaferri & Tullio Jappelli, 1998. "Using Subjective Income Expectations to Test for Excess Sensitivity of Consumption to Predicted Income Growth," CSEF Working Papers 12, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, 01.
  3. Erich Battistin & Raffale Miniaci & Guglielmo Weber, 2000. "What do we learn from recall consumption data?," IFS Working Papers W00/10, Institute for Fiscal Studies.
  4. Martin Browning & Thomas F. Crossley, 2001. "The lifecycle model of consumption and saving," IFS Working Papers W01/15, Institute for Fiscal Studies.
  5. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
  6. Brandolini, A., 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Date Quality, and the Time Pattern of Income Inequality," Papers 350, Banca Italia - Servizio di Studi.
  7. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
  8. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  9. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
  10. Bertola, Giuseppe & Guiso, Luigi & Pistaferri, Luigi, 2002. "Uncertainty and Consumer Durables Adjustment," CEPR Discussion Papers 3332, C.E.P.R. Discussion Papers.
  11. Tullio Jappelli & Luigi Pistaferri, 1999. "Intertemporal Choice and Consumption Mobility," CSEF Working Papers 23, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  12. Tullio Jappelli & Luigi Pistaferri, 2008. "Financial Integration and Consumption Smoothing," CSEF Working Papers 200, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  13. Brunello, Giorgio & Comi, Simona & Lucifora, Claudio, 2000. "The Returns to Education in Italy: A New Look at the Evidence," IZA Discussion Papers 130, Institute for the Study of Labor (IZA).
  14. Luigi Pistaferri, 1998. "Superior Information, Income Shocks and the Permanent Income Hypothesis," CSEF Working Papers 07, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  15. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
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Cited by:
  1. Yurko, Anna V., 2011. "How does income inequality affect market outcomes in vertically differentiated markets?," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 493-503, July.
  2. Jeremy Lise & Nao Sudo & Michio Suzuki & Ken Yamada & Tomoaki Yamada, 2013. "Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades," Working Papers 2013-011, Human Capital and Economic Opportunity Working Group.
  3. Virginia Maestri & Roventini, A. (Andrea), 2012. "GINI DP 30: Stylized Facts on Business Cycles and Inequality," GINI Discussion Papers 30, AIAS, Amsterdam Institute for Advanced Labour Studies.
  4. Moritz Drechsel-Grau & Kai Daniel Schmid, 2013. "Consumption-Savings Decisions under Upward Looking Comparisons: Evidence from Germany, 2002-2011," IMK Working Paper 118-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  5. Felbermayr, Gabriel & Impullitti, Giammario & Prat, Julien, 2014. "Firm Dynamics and Residual Inequality in Open Economies," IZA Discussion Papers 7960, Institute for the Study of Labor (IZA).
  6. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
  7. Heshmati, Almas & Rudolf, Robert, 2013. "Income vs. Consumption Inequality in South Korea: Evaluating Stochastic Dominance Rankings by Various Household Attributes," IZA Discussion Papers 7731, Institute for the Study of Labor (IZA).
  8. Nao Sudo & Michio Suzuki & Tomoaki Yamadai, 2012. "Inequalities in Japanese Economy during the Lost Decades," CARF F-Series CARF-F-284, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  9. Pericoli, Filippo Maria & Ventura, Luigi, 2011. "Family dissolution and precautionary savings: an empirical analysis," MPRA Paper 36354, University Library of Munich, Germany.
  10. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
  11. C. Giannetti & M. Madia & L. Moretti, 2013. "Job Insecurity and Financial Distress," Working Papers wp887, Dipartimento Scienze Economiche, Universita' di Bologna.
  12. Flaviana Palmisano & Dirk Van de gaer, 2013. "History dependent growth incidence: A characterisation and an application to the economic crisis in Italy," Working Papers 314, ECINEQ, Society for the Study of Economic Inequality.
  13. Simon Rottke & Alexander Klos, 2013. "Savings and Consumption When Children Move Out," SOEPpapers on Multidisciplinary Panel Data Research 621, DIW Berlin, The German Socio-Economic Panel (SOEP).
  14. Virginia Maestri & Andrea Roventini, 2012. "Inequality and Macroeconomic Factors: A Time-Series Analysis for a Set of OECD Countries," Working Papers 34/2012, University of Verona, Department of Economics.

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