Decomposing Inequality After Asymmetric Shocks: An Analysis of Italian Household Consumption

The massive shocks that have plagued the world economy over the past 15 years have altered the distribution of income, wealth and opportunities. The economic literature is replete with research testifying to the asymmetric effects of the financial crisis, COVID-19 and inflation. Although their impact on overall inequality has been widely explored, we believe there is a gap in the study of inequality factors and divides between socio-economic subgroups. Indeed, the common methodology for measuring inequality between subgroups, usually based on a comparison of averages, fails to fully account for asymmetric changes in distributions. We propose to employ a novel decomposition of the Gini index to overcome this issue. Our analysis focuses on COVID-19 and makes use of Italian household consumption micro-data to explore main inequality factors such as age, gender and geography. What emerges is that the increase in the age and gender gap is significantly smaller than it would be using the conventional methodology.