No. 738 - The redistributive effects of inflation: a microsimulation analysis for Italy

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by Nicola Curci, Marco Savegnago, Giordano Zevi and Roberta ZizzaDecember 2022

The study analyses the impact of the marked and unexpected rise in inflation recorded since the second half of 2021 on Italian household spending and quantifies the effects of government measures aimed at supporting incomes and alleviating the consequences of this increase on consumption. The analysis is based on the Microsimulation model of the Bank of Italy (BIMic), which adds information on income and wealth to that relating to consumption and prices.

The Government's measures managed to reduce the average inflation rate in 2022 by almost 2 percentage points. The interventions also appear to have reduced the increase in the inequality index caused by the inflationary shock by around 70 per cent. The most effective measure in mitigating the effects of price rises on inequality was the strengthening of the electricity and gas social bonuses, which are recognized on the basis of a household's economic situation.

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