Inequality and poverty in Italy: theoretical models and empirical evidence.

This study investigates the pattern of inequality and poverty in Italy in the 1980s and the 1990s, by means of both consumption and income measures, so as to separate their permanent and temporary components. The empirical analysis we conduct addresses not only economic issues, but also those of survey methodology and reliability of data. The identification and estimation of the components of inequality are based on the model derived in Blundell and Preston (1998, 1999). We develop a Minimum Distance Estimator, and the procedure also allows us to test for correlation of the temporary and permanent shocks with the past values of income and consumption.