Infrastructures and Income Inequality: The Case of Italian Provinces

This paper studies the relation between infrastructure endowment and income inequality across Italian provinces over the period 2001-2015. Using data from the "Ministero dell'Economia e Finanza" (MEF), we construct measures of income inequality for each province (Gini index and Theil index). The stock of infrastructures by province is measured by a set of indicators of physical endowments built by the Istituto Tagliacarne. The empirical analysis confirms the existence of a negative effect of the total infrastructure endowment on income inequality. This effect is mainly driven by transport and energy infrastructures. In contrast, other sub-components of infrastructure endowment, such as technological and banking infrastructures as well as cultural/entertainment networks, accentuate income inequality. We then show that infrastructures have a positive effect on the incomes of both the relatively poor classes (20% poorest class), the median and the richest class (10% richest), while they have no effect on the poorest 10% of the population. Finally, a north/south analysis of Italy suggests that the infrastructure deficit of the southern provinces might play a role in explaining their higher income inequality compared to the northern provinces.