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

Iacono, R; Ranaldi, M; (2021) The Evolution of Income Composition Inequality in Italy, 1989–2016. Review of Income and Wealth 10.1111/roiw.12555. (In press). Green open access

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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.

Type: Article
Title: The Evolution of Income Composition Inequality in Italy, 1989–2016
Open access status: An open access version is available from UCL Discovery
DOI: 10.1111/roiw.12555
Publisher version: https://doi.org/10.1111/roiw.12555
Language: English
Additional information: © 2021 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of International Association for Research in Income and Wealth. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Keywords: income composition inequality, functional and personal income distributions, Italy
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES
URI: https://discovery.ucl.ac.uk/id/eprint/10137275
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