Income inequality in Italy and Germany

Abstract

The study is a comparative analysis of spatial and socioeconomic determinants of income inequality in municipalities in Italy and Germany. The general aim is determining the accuracy in estimating unknown inequality values by learning from different types of municipality subsamples, with a particular focus on regional differences and applications for actionable policy implications. For this purpose, we combine demographics and socioeconomic data, with natural and built environment data, at multiple spatial scales. We use machine learning for estimating variable importance for the prediction of income inequality variables extracted from tabulated income tax declarations. Results show that selected variables explain 51% of the variability in income inequality in Germany, and 81% of the variability in income inequality in Italy. Factors associated with income inequality are largely similar between East and West Germany, but dissimilar between South and North Italy. Commuting, employment and foreign citizenship status are factors associated with inequality in both countries. In Italy, education levels play a significant role in connection with inequality, while in Germany housing costs and built-up density are significant factors.