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The Evolution of Income Composition Inequality in Italy, 1989–2016

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  • Roberto Iacono
  • Marco Ranaldi

Abstract

We study the evolution of inequality in income composition in terms of capital and labor income in Italy between 1989 and 2016. We document a rise in the share of capital income accruing to the bottom of the distribution, while the top of the distribution increases its share of labor income. This implies a falling degree of income composition inequality in the period considered and a weaker relationship between the functional and personal distribution of income in Italy. This result is robust to various specifications of self‐employment income; nonetheless, it hinges crucially on the treatment of rental incomes. While the dynamics of imputed rents has brought about a more equitable distribution of capital incomes across the income distribution, that of actual rents has led to higher concentration of capital incomes at the top in the decade preceding the outbreak of the financial crisis. Finally, we conceptualize a rule of thumb for policy makers seeking to reduce income inequality in the long run.

Suggested Citation

  • Roberto Iacono & Marco Ranaldi, 2023. "The Evolution of Income Composition Inequality in Italy, 1989–2016," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(1), pages 124-149, March.
    • Handle: RePEc:bla:revinw:v:69:y:2023:i:1:p:124-149
    DOI: 10.1111/roiw.12555
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    References listed on IDEAS

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    Cited by:

    1. Di Giorno, Saverio & Dileo, Ivano & Busato, Francesco, 2024. "Shades of grand corruption among allocative efficiency and institutional settings. The case of Italy," Socio-Economic Planning Sciences, Elsevier, vol. 93(C).
    2. Ranaldi, Marco, 2024. "Compositional Inequality: Measurement, Stylized Facts, and Normative Aspects," SocArXiv 75ghp, Center for Open Science.

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