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Is income becoming more polarized Italy? A closer look with a distributional approach

  • Riccardo Massari


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    During the 1990’s and the early 2000’s income inequality in Italy shows levels higher than many other OECD countries, not displaying any significant trend, upward or downward. This evidence relies essentially on summary measures of inequality, which may not capture aspects of the whole income probability density, such as multi-modalities and polarization. This paper applies a non-parametric tool, the “relative distribution”, to describe patterns of changes on the entire Italian household income distribution over the period 1989–2006. Furthermore, this approach also allows us to decompose the relative density into changes in location and changes in shape, in order to emphasize whether income distribution becomes more polarized or exhibits patterns of convergence toward middle income classes. A similar decomposition enables us to analyze the impact of selected covariates on income distribution. During the period Italy experienced a significant increase of household income polarization, which has particularly affected incomes below the median. In addition, this relative polarization is mainly correlated to changes in the returns to household-head occupational status.

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    Paper provided by Doctoral School of Economics, Sapienza University of Rome in its series Working Papers with number 1.

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    Length: 28 pages
    Date of creation: Feb 2009
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    Handle: RePEc:dsc:wpaper:1
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    1. D'Ambrosio, Conchita, 2001. "Household Characteristics and the Distribution of Income in Italy: An Application of Social Distance Measures," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(1), pages 43-64, March.
    2. Marron, J.S. & Schmitz, H.-P., 1992. "Simultaneous Density Estimation of Several Income Distributions," Econometric Theory, Cambridge University Press, vol. 8(04), pages 476-488, December.
    3. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Temi di discussione (Economic working papers) 350, Bank of Italy, Economic Research and International Relations Area.
    4. Joan-Maria Esteban & Debraj Ray, 1991. "On the Measurement of Polarization," Boston University - Institute for Economic Development 18, Boston University, Institute for Economic Development.
    5. John DiNardo & Nicole M. Fortin & Thomas Lemieux, 1995. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," NBER Working Papers 5093, National Bureau of Economic Research, Inc.
    6. Cwik, Jan & Mielniczuk, Jan, 1993. "Data-dependent bandwidth choice for a grade density kernel estimate," Statistics & Probability Letters, Elsevier, vol. 16(5), pages 397-405, April.
    7. Andrea Brandolini & Timothy M. Smeeding, 2007. "Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes," CHILD Working Papers wp08_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    8. Andrea Brandolini & Piero Cipollone & Paolo Sestito, 2001. "Earnings Dispersion, Low Pay and Household Poverty in Italy, 1977-1998," Temi di discussione (Economic working papers) 427, Bank of Italy, Economic Research and International Relations Area.
    9. Riccardo Massari & Maria Pittau & Roberto Zelli, 2009. "A dwindling middle class? Italian evidence in the 2000s," Journal of Economic Inequality, Springer, vol. 7(4), pages 333-350, December.
    10. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2003. "Polarization: Concepts, Measurement, Estimation," Working Papers 46, Barcelona Graduate School of Economics.
    11. Giovanni D'Alessio & Luigi Federico Signorini, 2000. "Disuguaglianza dei redditi individuali e ruolo della famiglia in Italia," Temi di discussione (Economic working papers) 390, Bank of Italy, Economic Research and International Relations Area.
    12. Boeri, Tito & Brandolini, Andrea, 2005. "The Age of Discontent: Italian Households at the Beginning of the Decade," IZA Discussion Papers 1530, Institute for the Study of Labor (IZA).
    13. Jenkins, Stephen P. & Van Kerm, Philippe, 2004. "Accounting for Income Distribution Trends: A Density Function Decomposition Approach," IZA Discussion Papers 1141, Institute for the Study of Labor (IZA).
    14. Maria Grazia Pittau & Roberto Zelli, 2004. "Testing for changing shapes of income distribution: Italian evidence in the 1990s from kernel density estimates," Empirical Economics, Springer, vol. 29(2), pages 415-430, 05.
    15. Elisa Molanes-López & Ricardo Cao, 2008. "Plug-in bandwidth selector for the kernel relative density estimator," Annals of the Institute of Statistical Mathematics, Springer, vol. 60(2), pages 273-300, June.
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