A dwindling middle class? Italian evidence in the 2000’s

In recent years, increasing attention has been paid to household impoverishment in Italy. Most of works dealing with this issue are based on summary statistics, which do not capture the whole information contained in the income distribution. The paper applies a non-parametric tool, the “relative distribution”, to Italian household income data during 2002-2004. The relative density function is a proper density function which compares two distributions observed in different years, in order to describe patterns of differences on the entire income scale. This approach also allows for a decomposition of the relative distribution density function to isolate changes due to differences in location from changes due to differences in shape, thus providing further insights into the analysis of income polarization. During the 2000’s there was a significant location effect, but also an increased income polarization, which has particularly affected incomes below the median. Social group analyses, according to the main income source of the household, show significant re-distribution effects within groups.