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The redistributive effects of inflation: a microsimulation analysis for Italy

Author

Listed:
  • Nicola Curci

    (Banca d’Italia, Directorate General for Economics, Statistics and Research, Rome, Italy)

  • Marco Savegnago

    (Banca d’Italia, Directorate General for Economics, Statistics and Research, Rome, Italy)

  • Giordano Zevi

    (Banca d’Italia, Directorate General for Economics, Statistics and Research, Rome, Italy)

  • Roberta Zizza

    (Banca d’Italia, Directorate General for Economics, Statistics and Research, Rome, Italy)

Abstract

We analyse the impact of the marked and unexpected increase in inflation recorded since the second half of 2021 on Italian households’ purchasing power. Exploiting microsimulation tools, we are able to quantify the extent to which government measures supporting households’ incomes and lessening energy price hikes, mitigated the distributional impact of the inflationary shock. According to our estimates, in 2022 the measures attenuated inflation on average by slightly less than 2 percentage points and reduced the impact of the shock on households’ purchasing power by almost €32 billion (from more than €80 billion to less than €50 billion). This implies that in 2022 government intervention reduced the expected drop in purchasing power from an average €3,200 per household to about €2,000, with a relatively more marked effect for low-income households. Evaluated on the basis of both their cost for the public finances and their impact on inequality, the strengthening of the electricity and gas social bonuses, targeted at less well-off households, was the most effective intervention while untargeted price reductions (such as the decrease in VAT rates on gas tariffs or lower excise duties on fuel) were the least effective. The one-off allowances (€200 and €150 bonuses) and the other measures affecting take-home pay (reduction of social security contributions paid by employees and the advance partial payment of pension revaluations) were only moderately effective since these measures, being conditional on individual income, also benefit wealthy households.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Nicola Curci & Marco Savegnago & Giordano Zevi & Roberta Zizza, 2025. "The redistributive effects of inflation: a microsimulation analysis for Italy," International Journal of Microsimulation, International Microsimulation Association, vol. 18(3), pages 87-100.
    • Handle: RePEc:ijm:journl:v:18:y:2025:i:3:p:87-100
    DOI: 10.34196/ijm.00330
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    Cited by:

    1. Lanterna, Federica, 2024. "Trying to find a balance: Energy excise duties in the context of climate targets, energy shocks, and redistributive goals," Energy Policy, Elsevier, vol. 195(C).
    2. Sologon, Denisa M. & Doorley, Karina & O'Donoghue, Cathal, 2024. "Gender Disparities in Inflation during the Cost-of-Living Crisis in Europe: A Novel Decomposition," IZA Discussion Papers 16860, IZA Network @ LISER.
    3. Bonfatti, Andrea & Giarda, Elena, 2025. "Energy price increases and mitigation policies: Redistributive effects on Italian households," Journal of Policy Modeling, Elsevier, vol. 47(2), pages 251-275.
    4. Filippo Pallotti & Gonzalo Paz-Pardo & Jiri Slacalek & Oreste Tristani & Giovanni L. Violante, 2024. "Who Bears the Costs of Inflation? Euro Area Households and the 2021–2023 Shock," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    5. Gnocato, Nicolò, 2025. "Energy price shocks, unemployment, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 151(C).
    6. Amores, Antonio F. & Christl, Michael & De Agostini, Paola & De Poli, Silvia & Maier, Sofia, 2025. "Limiting Prices or Transferring Money? An ex ante assessment of alternative measures to cope with the hike in energy prices," Energy Economics, Elsevier, vol. 147(C).
    7. O'Donoghue, Cathal & Can, Zeynep Gizem & Montes-Viñas, Ana & Sologon, Denisa M., 2025. "Macro-Economic Change and Household Financial Strain in Europe 2006-2022," IZA Discussion Papers 17739, IZA Network @ LISER.
    8. Pallotti, Filippo & Paz-Pardo, Gonzalo & Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2023. "Who bears the costs of inflation? Euro area households and the 2021–2022 shock," Working Paper Series 2877, European Central Bank.
    9. Nicola Curci & Antonella Tomasi, 2026. "Fiscal drag, discretionary policy measures and the purchasing power of Italian households in 2022-2025," Questioni di Economia e Finanza (Occasional Papers) 998, Bank of Italy, Economic Research and International Relations Area.
    10. Leonardo Ciambezi & Alessandro Pietropaoli, 2026. "Relative Price Shocks and Inequality: Evidence from Italy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 12(1), pages 397-440, March.
    11. Davide Delle Monache & Claudia Pacella, 2024. "The drivers of inflation dynamics in Italy over the period 2021-2023," Questioni di Economia e Finanza (Occasional Papers) 873, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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