No. 998 - Fiscal drag, discretionary policy measures and the purchasing power of Italian households in 2022-2025
The study estimates the contribution to the change in Italian households' disposable income between 2021 and 2025, attributable to: the adjustment of nominal incomes to inflation; fiscal drag and benefit erosion; real growth, mainly driven by higher employment; and discretionary budgetary policies affecting household incomes. The analysis relies on BIMic, Banca d'Italia's microsimulation model.
In 2025, households recovered on average the purchasing power lost due to the inflationary shock following the energy crisis, also thanks to the contribution of discretionary policies, which more than offset fiscal drag and benefit erosion.
Disposable income growth was slightly higher than inflation for households in the three middle disposable income quintiles. It broadly matched inflation for the bottom quintile and fell slightly short of it for the top quintile.
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