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The increase in earnings inequality and volatility in Italy: the role and persistence of atypical contracts

Author

Listed:
  • Domenico Depalo

    (Bank of Italy)

  • Salvatore Lattanzio

    (Bank of Italy)

Abstract

This paper investigates earnings inequality in Italy between 1990 and 2021 using administrative matched employer-employee data from the Italian Social Security Institute (INPS). It shows that the inequality and volatility of annual earnings have risen steadily over time according to various measures, such as the Gini index, the interquartile ranges, and the variance. It also explores the mechanisms behind this increase, showing that the rise in inequality was driven by the number of weeks worked per year, which varied heterogeneously across workers, as atypical contracts (e.g. part-time and fixed-term) became widespread in the economy. We compare these measures based on the annual compensation of workers with those based on full-time equivalent weekly wages, which display a much less dispersed evolution over time, except during the double-dip recession of 2008-2012. Finally, we document a high degree of persistence, increasing over time, in atypical contracts both in the short and in the long term.

Suggested Citation

  • Domenico Depalo & Salvatore Lattanzio, 2023. "The increase in earnings inequality and volatility in Italy: the role and persistence of atypical contracts," Questioni di Economia e Finanza (Occasional Papers) 801, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_801_23
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2023-0801/QEF_801_23.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bavaro, Michele & Raitano, Michele, 2024. "Is working enough to escape poverty? Evidence on low-paid workers in Italy," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 495-511.

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    More about this item

    Keywords

    earnings; wages; inequality; volatility; labour contracts;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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