Income Polarization and Inequality: Urban Centers vs. Internal Areas in Italy

A dual-faceted assessment of the income disparities between peripheral and central areas forms an important contribution to the economic inequality literature in Italy. The empirical data on inequality within Italy is updated so that a dynamic relationship between peripheral regions and urban centers can be understood. This study, therefore, uses a relative distribution approach as suggested by Handcock and Morris (1998, 1999) to offer a comprehensive analysis of income distribution particularly at the tails. Using this methodology offers an opportunity to compare directly between peripheral areas and central ones with respect to their level of income polarizations. Unconditionally quantile regression technique as suggested by Firpo et al. (2009) has been used for further econometric analysis during this study. This technique allows for analyzing how changes in marginal values of explanatory factors affect the distributional statistics of income inequality and polarization. Research results highlight significant differences in dynamics of incomes’ distributions indicating that periphery areas are more polarized due to demographic variables like population density or economic opportunities than any other component. Conversely, while more stable overall, there is considerable volatility among lower-income brackets in core communities too.The study concludes with policy recommendations aimed at mitigating income polarization through targeted investments in infrastructure and services in peripheral areas and supporting low-income households in central areas through social welfare programs and employment opportunities. JEL Classification : O15 · R11 · C14