[Paper Review] Assessing the Inequalities of Wealth in Regions: the Italian Case

Roy Cerqueti, Marcel Ausloos|arXiv (Cornell University)|Oct 18, 2014

Regional Economics and Spatial Analysis9 references15 citations

TL;DR

This study assesses regional wealth inequality in Italy (2007–2011) using aggregated tax income (ATI) data from 8,000+ municipalities, applying the Gini, Theil, and Herfindahl-Hirschman (HHI) indices to measure income concentration and dispersion. It reveals stark North-South disparities, with Northern regions showing higher inequality and polarization, while Southern regions like Campania exhibit declining HHI due to economic decline reducing inter-municipal disparities.

ABSTRACT

This paper discusses region wealth size distributions, through their member cities aggregated tax income. As an illustration, the official data of the Italian Ministry of Economics and Finance has been considered, for all Italian municipalities, over the period 2007-2011. Yearly data of the aggregated tax income is transformed into a few indicators: the Gini, Theil, and Herfindahl-Hirschman indices. On one hand, the relative interest of each index is discussed. On the other hand, numerical results confirm that Italy is divided into very different regional realities, a few which are specifically outlined. This shows the interest of transforming data in an adequate manner and of comparing such indices.

Motivation & Objective

• To analyze regional disparities in wealth distribution across Italian municipalities using official tax income data.
• To evaluate the relative strengths and interpretive value of three inequality indices—Gini, Theil, and Herfindahl-Hirschman (HHI)—in a regional economic context.
• To identify structural differences between Northern and Southern Italian regions in terms of income concentration and fairness.
• To assess temporal changes in inequality metrics over the 2007–2011 period, highlighting economic shifts and policy implications.

Proposed method

• Utilized official data from the Italian Ministry of Economics and Finance (MEF) on aggregated tax income (ATI) for all Italian municipalities (comuni) from 2007 to 2011.
• Computed three inequality indices: Gini (measures overall inequality), Theil (measures dispersion and entropy-based inequality), and HHI (measures market concentration and polarization).
• Adapted the HHI for municipal-level wealth distribution, interpreting high values as indicators of low competition and high concentration in a few cities.
• Performed regional-level analysis by aggregating municipal data to 20 regions, enabling cross-regional comparison of inequality metrics.
• Tracked changes in rank order and index values over time to detect shifts in regional economic structures.
• Compared regional indices to national averages to identify regions with above- or below-average inequality and concentration.

Experimental results

Research questions

• RQ1 How do the Gini, Theil, and Herfindahl-Hirschman indices compare in their ability to capture regional wealth inequality in Italy?
• RQ2 What are the temporal trends in wealth concentration and inequality across Italian regions from 2007 to 2011?
• RQ3 Why do certain regions like Campania and Friuli Venezia Giulia show declining HHI values despite economic deterioration?
• RQ4 To what extent do regional disparities in inequality reflect internal (within-region) or inter-regional differences in wealth distribution?
• RQ5 How do the relative positions of regions in inequality rankings (e.g., Trentino Alto Adige vs. Calabria) shift over time, and what economic factors explain these shifts?

Key findings

• Trentino Alto Adige and Calabria both reduced their Theil indices from 2007 to 2011 (1.2823 to 1.2329 and 1.2712 to 1.2344, respectively), indicating a decline in inequality, though Trentino Alto Adige remained more unequal due to its higher initial wealth level.
• Campania’s HHI index dropped significantly from 0.0526 in 2007 to 0.0471 in 2011, reflecting a reduction in municipal wealth concentration and increased equalization of contributions to regional GDP.
• Lazio, Liguria, and Piemonte had Theil and Gini indices above the national average, indicating higher inequality, while Lazio, Liguria, Valle d’Aosta, Umbria, and Molise had HHI values above the national level, signaling greater polarization.
• In Molise, polarization is driven by concentration of institutions and economic activity in a few large municipalities, while in Umbria, Perugia and Terni play a dominant role due to industrial presence.
• The HHI for Friuli Venezia Giulia remained stable (0.5199 to 0.5184), suggesting consistent regional concentration, unlike Campania’s increasing equalization.
• The study confirms that the Gini index captures both within- and between-region inequality, while Theil and HHI focus primarily on within-region disparities, highlighting methodological differences in index interpretation.