“Riches to rags in 3 generations” in an English expression, which means that the first generation creates wealth, the second maintains it, and the third squanders it. But this doesn’t seem to be the case in Florence, according to a study that was conducted by two economists, Guglielmo Barone and Sauro Mocetti of the Bank of Italy, and reported in the Wall Street Journal (and other publications). The richest families in Florence today are descended from the richest families almost 600 years ago.
In the study, the researchers compared data on Florentine taxpayers in 1427 (names, professions, income, and wealth) with tax data in 2011. Because Italian surnames are very regional and distinctive, they could compare the income of families of today with those with the same surname in 1427. While not every person with a certain surname in Florence today is a descendent of the people with that name in 1427, it is probably true for the most part. This research was possible because of a fiscal crisis in Florence. In 1427 the city was almost bankrupt from an ongoing war with Milan. So the Priors of the Republic conducted a tax census of about 10,000 citizens, including names, occupations, and wealth.
The researchers maintain that socioeconomic status is incredibly persistent. The Florentine surnames of the richest today belong to families that, in the 1400s were members of the shoemakers’ guild. Descendants of members of the silk guild and descendants of attorneys are also among the wealthiest families today. (As a condition of access to data, the authors did not publish any surnames.)
Conventional studies of economic mobility generally examine change across one generation – often comparing the income of fathers with their sons. These studies show that mobility varies significantly from country to country. They use the term “elasticity” where a “1” means that the income level is perfectly inherited between father and son, and a “0” means there is no inheritance. Nordic countries have a low elasticity of 0.2%, while Italy, the United States, and Great Britain have a relatively high elasticity of 0.5%. The important thing is that even relatively high elasticity implies a great deal of mobility over time…even 3 generations. But Barone and Mocetti show that, empirically, this is not the case in Florence and that income level can persist across 7 centuries.
What is also noteworthy is this finding in a city that underwent extraordinary change over the centuries. In 1427 Leonardo da Vinci and Michelangelo were not yet born. Florence went from rule under the Medici family, to a Republic, back to Medici rule. The city fell to the Holy Roman Empire, the Medici line went extinct, and the city was taken over by Napoleon. It lost its role as head of a city-state and became part of the Italian Kingdom, under Rome. Mussolini ruled it, and the Nazis occupied it. After the war, the city experienced a period known as the “miracolo economico italiano” – the Italian economic miracle, with GDP growing more than 8% a year. The GDP grew more in that period than in the 5 centuries between 1400 and 1900.
This study does not imply that the rich are becoming richer and that the poor are becoming poorer, which is an important socioeconomic and political issue today. This research is not about the super-rich (the top 1% in income). The scope of the authors’ research is for an entire population.