History dependent growth incidence

Working Paper 2013-314

Abstract

We propose a characterisation of an aggregate measure of growth that takes into account the initial economic conditions of individuals. Our measure is a weighted average of individual income growth with weights that are decreasing with the rank of the individual in the initial income distribution. We apply our theoretical framework to evaluate the growth processes experienced by the Italian population in the last decade and find that the 2008-2010 crisis deteriorated the income growth of the initially poor disproportionately. This is compatible with the dual nature of the Italian labour market.

Authors: Flaviana Palmisano, Dirk Van de gaer.