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Differences set in stone: evidence on the inequality-mobility trade off in Italy

Working Paper 2022-633

Abstract

Observing individual income dynamics is crucial to assess the characteristics of theprocess shaping income inequality and its consequences on individual and social wellbeing.Given the level of cross-sectional inequality, a mobile society faces differentchallenges than one where people are stuck in their income positions for their wholelife or see their income stagnate. Moreover, people prefer a stable income stream toa fluctuating one, and the policy concern should deal with both the level of incomeand its dynamics. Using Italy as our case study, we characterise the long-run evolutionof intragenerational mobility in the last fifty years and find evidence of a trade-offbetween income inequality and ’good’ mobility, and complementarity with the worstnotions ofmobility related to income instability. Exploiting individual-level estimates ofgood and badmobility, we also uncover patterns of unequalmobility – the concentrationof low upward mobility and frequent fluctuations among the most vulnerable groups.

Authors: Francesca Subioli, Michele Raitano.

Keywords: Earnings inequality, Great Gatsby curve, intragenerational mobility, earnings dynamics, unequal mobility, Italy
JEL: D31, D63