The inequality - illegality nexus: regional evidence on unauthorized building in Italy (2004–2019)

This paper investigates whether income inequality is associated with unauthorized building across Italian regions over 2004–2019. While prior research has examined the socio-economic and institutional determinants of environmental crime, the role of inequality in illegal construction remains largely unexplored. Using a panel dataset for all 20 Italian regions, we estimate log-log fixed-effects models under alternative temporal specifications, including two-way fixed effects and region-specific trends. Across all models and alternative Gini measures, we find a positive and robust association between income inequality and illegal building. Estimated elasticities suggest that a 1% increase in regional inequality is associated with a 0.6% to 1.3% increase in unauthorized construction. The findings indicate that illegal building is linked not only to weaknesses in planning enforcement, but also to broader territorial disparities in economic opportunities, housing access, and institutional capacity. Overall, the paper highlights illegal building as a structural regional development issue shaped by inequality, governance, and compliance.