Income inequalities in Italy : trend over time

In this note we aim to deepen the OECD (2011) results that highlight a critical situation for Italy, providing the image of an unequal country. We will consider a long-period trend of income inequalities, giving particular attention to regional differences. Moreover, we will try to comprehend if some social group has been stricken more that others by the economic crisis.

The data used in the analysis come from the “Survey on Household Income and Wealth” (SHIW) carried out by Bank of Italy from 1997 to 2010. The survey questions focus on disposable incomes and Italian households’ savings. In order to measure income inequalities, we rely on two indexes :
- Gini coefficient : provides a single statistical measure of the degree of income inequality. It lies between 0 and 1, with perfect equality at zero and income inequality increasing as the Gini coefficient approaches 1.
- Income ratio : contrasts the top 10% of earners with the lowest 10%. In this case we have a comparison between two parts of the income distribution (the richest and the poorest). The greater the disparity, the greater the ratio.

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Trend in Gini index. Italy, 1977-2010

As figure 1 points out, there was a clear decline in the income inequalities at the end of the Seventies. Ten years later, to the contrary, the Gini index rose dramatically. The results become intelligible if we link them to the Italian economic situation in those periods. The decline correspond with a period of economic expansion characterised by liberal policies (Valli 1999), whereas the rapid increase (1992) coincides with a striking economic crisis, that lead the country close to the bankrupt. Thus, we can expect to find a similar situation after 2008, the year of the beginning of the current financial crisis (the red vertical line in figure one). Our expectations are partially verified : after 2008 there is a slightly increase in the value of the Gini index. These results are confirmed by the income ratio, where the gradient is even greater. To conclude, income inequalities after an economic crisis seems to be more remarkable.
In order to understand if disadvantaged people have been more damaged by economic crisis than the wealthier ones, we can look at figure 2 that report the evolution of real income. It is interesting to notice that, after 2008, all social classes experienced a decrease in their income, with the only exception of entrepreneurs which showed an opposite trend. Even if we look at the period of the crisis in 1991-1992, managers and professionals displayed a huge raise in their real income, while white collars, self employed and working class earnings suffered a reduction. By and large, it is worthwhile to highlight that upper classes tend to have less economic problems during periods of crisis.

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Trend in disposable income according to social class. Italy, 1977-2010

Looking at regional disparities (figure 3), it emerges clearly that the situation is worse in the Southern areas of the country. The inequalities between North and South started in the Eighties, as a consequence of the second oil crisis, and it is possible to observe their increase both during the economic crisis of 1992 and the one of 2008. This empirical evidences point out that the pattern observed for the Italian case persist at the local level, with the Southern regions more affected by the national economic condition than the rest of the country. In summary, in Italy inequalities tend to grow-up during economic crisis and concern specially people from lower social classes and individuals living in the depressed area of the country.

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Trend in income ratio according to geographic area of residence. Italy, 1977-2010

References :
- OECD (2011). Divided We Stand. Why inequality keeps rising ? Paris : OECD Publishing
- Valli, V. (1999). Politica economica europea. Firenze : Carocci.

Photo : Alessio Damato (Wikimedia Commons)


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5 novembre 2012

Thèmes : • Revenus • Données de synthèse


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