Distributional tensions in the South of Italy: empirical evidence and policy implications Vito Peragine| Università di Bari SAPIENZA UNIVERSITÀ DI ROMA 25-26 NOVEMBRE 2016 CONVEGNO SCIENTIFICO LA SOCIETÀ ITALIANA E LE GRANDI CRISI ECONOMICHE 1929-2016

Outline Inequality and distribution: why do we care about? A tour d'horizon of the evolution of inequality: in Europe, in OECD countries, at the Global level Inequality and distributional change in the South of Italy

Inequality: why do people care about? Fast increase in inequality or lasting high inequality in key countries (e.g. US) Increasing media attention to top incomes. Inequality and recession: Inequality has been often presented as “the price to pay” for sustained economic growth. When growth is low, and recession is prolonged, inequality is not tolerated anymore. "The social elevator does not work anymore“ The perspective of upward mobility, for themselves or for theirs children, may lead individuals to accept a high level of inequality in current incomes. When, for the downturn of economies, such perspective is unsecure, and, on the other hand, the welfare of the next generation appears worse than the welfare of the past generation, the current level of inequality becomes largely unacceptable.

Inequality: why do we (economists) care about? Intrinsic and instrumental reasons: Inequality and distributive justice Inequality and growth: direct and indirect effects Inequality, perceptions, political preferences and attitudes to redistribution Non economic consequences of economic inequality

Inequality: why do we (economists) care about? Inequality and Distributional tensions Social cohesion or social contract Economic performance Crisis of existing social contracts in Europe and US? Is the perception that 'inequality is rising everywhere ' correct? Differences across countries, periods and inequality measures

The cost of 'excessive' inequality Economic costs Depressive effect through the demand side One of the causes of the Great Recession ? Inefficiency of the inequality of opportunity Unexploited economic potential Endogenous distortive redistribution Taxation , violence (?) Non-economic costs 'Populism' (but, is it inequality or other types of exclusion?) Self-reinforcing rise in inequality through intergenerational transmission How much is too much inequality?

Other inequality concepts and distributional tensions Polarization and the decline of the middle class There are several signals of crisis of the middle class. Frustration, perceptions of falling standards of living, related to the shortage of good jobs, dissatisfaction with the quality of public services. The intergenerational divide Some evidence suggests that young generations are experiencing an economic situation that is worse than that experienced by the older generations, both in terms of average living standard and in term of risk. Vulnerability, poverty and unemployment tend to be higher for young individuals. Social mobility and inequality of opportunity

Outline Inequality and distribution: why do we care about? A tour d'horizon of the evolution of inequality: in Europe, in OECD countries, at the Global level Inequality and distributional change in the South of Italy

How unequal the world is? A lot, it has a Gini of 70 In PPP terms, the top 5 percent of world population controls one-third of world income. They make in 2 days what the poorest 5 percent make in a year (B. Milanovic) From survey data that do not include the really rich people! Source: Branko Milanovic Global inequality in a more educated world

Global Inequality evolution: 1950-2012 .75 China moves in Concept 3 Concept 2 .65 Gini coefficient .55 Concept 1 By the way, if the world were a country it would be the most unequal… Divergence begins Divergence ends .45 1950 1960 1970 1980 1990 2000 2010 year Source: Branko Milanovic Global inequality in a more educated world

Global inequality in a more educated world Global Inequality Evolution since the fall of the Berlin Wall Real income growth at various percentiles of global income distribution, 1988-2008 (in 2005 PPPs) X “China’s middle class” X“US lower middle class” Global inequality in a more educated world

Outline Inequality and distribution: why do we care about? A tour d'horizon of the evolution of inequality: in Europe, in OECD countries, at the Global level Inequality and distributional change in the South of Italy

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historical Database (1977-2014), Bank of Italy.

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historical Database (1977-2014), Bank of Italy.

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historiacl Database (1977-2014), Bank of Italy.

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historical Database (1977-2014), Bank of Italy.

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historical Database (1977-2014), Bank of Italy.

Notes: Household equivalized disposable income at constant prices of 2005. SHIW Historical Database (1977-2014), Bank of Italy.

Grazie per l’attenzione. 25-26 NOVEMBRE 2016 | SAPIENZA UNIVERSITÀ DI ROMA TITOLO INTERVENTO SOTTOTITOLO Grazie per l’attenzione.