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Does Consumption Inequality Track Income Inequality in Italy?

  • Tullio Jappelli

    (University of Naples Federico II)

  • Luigi Pistaferri

    (Stanford University)

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. We find that over the sample period income inequality is higher and has grown faster than consumption inequality. Most of the increase is income inequality is related to an increase in the degree of earnings' instability rather than to shifts in the wage structure. We suggest that, in particular, the labor market reforms of the 1990s and 2000s are the most plausible explanation of the increased earnings inequality. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.11.001
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 1 (January)
Pages: 133-153

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Handle: RePEc:red:issued:09-225
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  1. Erich Battistin & Raffale Miniaci & Guglielmo Weber, 2000. "What do we learn from recall consumption data?," IFS Working Papers W00/10, Institute for Fiscal Studies.
  2. Tullio Jappelli & Luigi Pistaferri, 2004. "Intertemporal choice and consumption mobility," 2004 Meeting Papers 195, Society for Economic Dynamics.
  3. Martin Browning & Thomas F. Crossley, 2000. "The Life Cycle Model of Consumption and Saving," Social and Economic Dimensions of an Aging Population Research Papers 28, McMaster University.
  4. 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.
  5. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
  6. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers W97/15, Institute for Fiscal Studies.
  7. 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.
  8. Deaton, A. & Paxson, C., 1993. "Intertemporal Choice and Inequality," Papers 168, Princeton, Woodrow Wilson School - Development Studies.
  9. Meghir, Costas & Pistaferri, Luigi, 2002. "Income Variance Dynamics and Heterogeneity," CEPR Discussion Papers 3632, C.E.P.R. Discussion Papers.
  10. Jappelli, Tullio & Pistaferri, Luigi, 2000. "Using subjective income expectations to test for excess sensitivity of consumption to predicted income growth," European Economic Review, Elsevier, vol. 44(2), pages 337-358, February.
  11. 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.
  12. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, 07.
  13. repec:fth:prinin:407 is not listed on IDEAS
  14. Lucifora, Claudio & Comi, Simona & Brunello, Giorgio, 2000. "The Returns to Education in Italy: A New Look at the Evidence," IZA Discussion Papers 130, Institute for the Study of Labor (IZA).
  15. 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.
  16. Giuseppe Bertola & Luigi Guiso & Luigi Pistaferri, 2005. "Uncertainty and Consumer Durables Adjustment," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 973-1007.
  17. 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.
  18. Orley Ashenfelter & Cecilia Rouse, 1999. "Schooling, Intelligence, and Income in America: Cracks in the Bell Curve," NBER Working Papers 6902, National Bureau of Economic Research, Inc.
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