Drivers of Income Inequality Across Italian Provinces: Unraveling the Role of Digitalisation and Labour Flexibility

Valeria Cirillo, Marialuisa Divella and Giuseppe Simone

No 1816, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: This paper examines the drivers of income inequality across Italian provinces, focusing on the interaction between digitalisation and labour market flexibility. Using a novel provincial panel that combines Italian Labour Force Survey (LFS) data with detailed information on tasks from the INAPP-ISTAT Survey on Italian Occupations (ICP) and tax-based income records from Italian Ministry of Economics and Finance (MEF), we show that a higher incidence of non-standard employment reduces the labour share, lowers average employment income, and increases the gap between high- and low-income earners. Digitalisation, measured through the digital task intensity of local occupations, is associated with higher average incomes but also greater income polarisation. However, the income gains from digitalisation weaken and eventually disappear in provinces characterised by more precarious employment. Overall, the findings suggest that the digital transition, in the absence of stronger labour market protections, may reinforce rather than reduce territorial disparities.

Keywords: Non-standard work; Digitalisation; Wage inequality; Labour-market dualisation; Regional inequality; Italian provinces (search for similar items in EconPapers)
JEL-codes: J31 J41 J42 O33 R23 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-eur, nep-lma and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:1816

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