Household Structure and Income Inequality

Abstract

This paper examines the effects of demographic structure on the evolution of inequality in Italy from 1977 to 1995, and on its inequality ranking relative to 11 of the other 14 European Union countries in the mid-1990s. The composition of Italian households was substantially different in 1995 both from that observed in the two preceding decades, and from that recorded in other EU countries. The distance between mean equivalent disposable household incomes in various demographic groups varied significantly over time and between countries. Nevertheless, demographic effects on inequality appear on the whole to be secondary. The following results hold, irrespective of the correction for demographic differences: (1) inequality in the distribution of equivalent disposable incomes between persons showed considerable fluctuations but no particular medium-term tendency in Italy; (2) in the mid-1990s Italy was, together with the United Kingdom, the EU country with the highest inequality, a result which is only partly explained by the regional dualism of the Italian economy.