The redistributive effects of inflation: a microsimulation analysis for Italy
- Banca d’Italia, Directorate General for Economics, Statistics and Research, Italy
- Article
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Figures
Harmonized inflation rate (HICP).
Source: computation on Istat data.
Note: monthly data, percent and percentage points.
Observed and simulated inflation rates and expenditure increase.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Household-specific inflation rates and equivalent disposable income.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Average propensity to consume by quintiles of equivalent disposable income
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: these figures are obtained by censoring observations to display a propensity to consume smaller or equal to 100%. The incidence of censored observations is highest in the first quintile (more than 70%).
Incidence of the inflationary shock by quintiles of equivalent disposable income.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: In the left-hand panel, the basket composition effect is obtained by relating to household disposable income (in the absence of shock) the difference between the expenditure that would occur if each good and service was subject to a homogeneous inflation rate (equal to the economy-wide inflation) and the expenditure that would occur in presence of heterogeneous inflation rates among goods and services. The effect due to the average propensity to consume is obtained by relating to household disposable income (in the absence of shock) the difference between the expenditure that would occur with the homogeneous inflation rate cited above and the spending that would have occurred in the absence of shocks. Both these effects are estimated assuming no Government interventions. In the right-hand panel, the average incidence of the inflationary shock by quintiles of equivalent income is obtained by relating to household disposable income: i) the difference between expenditure in the absence of government measures and expenditure in the absence of shock, ii) the difference between actual post-shock spending and non-shock spending and iii) the impact of government measures.
Government measures: targeting (bn. euros) and incidence on disposable income, by quintiles of equivalent income.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: “untargeted price measures” include the reduction of general system charges, of excise duties and of VAT; “one-off allowances” include the 200- and 150-euros bonuses; “other measures affecting take-home pay” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.
incidence of the shock and measures targeting (bn euros) by deciles of ISEE.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: “untargeted price measures” include the reduction of general system charges, of excise duties and of VAT; “one-off allowances” include the 200- and 150-euros bonuses; “other measures affecting take-home pay” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.
Analysis by prevailing sources of income in the household.
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: “untargeted price measures” include the reduction of general system charges, of excise duties and of VAT; “one-off allowances” include the 200- and 150-euros bonuses; “other measures affecting take-home pay” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.
Pre- and post-shock inequality in purchasing power
Source: our calculations on data from Istat, Banca d’Italia and BIMic.
Note: “measure on prices” include the reduction of general system charges, of excise duties on fuel and of VAT rate on gas; “one-off allowances” include the 200- and 150-euros bonuses; “other measures” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.
Tables
Impact of the inflationary shock on households’ purchasing power (bn euros).
| Estimated total effect without Government intervention | 81.3 |
|---|---|
| - minus reduction of general system charges, excise duties and VAT | 16.2 |
| - minus increase of the social bonus on energy bills | 3.1 |
| - minus one-off allowances | 8.9 |
| - minus other measures affecting take-home pay | 3.6 |
| = Effective impact including Government intervention | 49.6 |
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Source: our calculations on data from Istat, Banca d’Italia and BIMic.
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Note: “one-off allowances” include the 200- and 150-euros bonuses; “other measures affecting take-home pay” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.
Impacts on average households’ purchasing power (euros)
| Total | Quintiles of disposable income | |||||
|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | ||
| Total effect without Government intervention: (a) | 3,186 | 2,305 | 2,675 | 3,160 | 3,497 | 4,292 |
| Total effect with Goverm-nment intervention: (b) | 1,944 | 998 | 1,320 | 1,955 | 2,273 | 3,176 |
| Attenuation of the total effect due to Government intervention: (a)-(b) of which | 1,241 | 1,307 | 1,356 | 1,205 | 1,224 | 1,115 |
| measures on general system charges, excise duties and VAT | 635 | 468 | 567 | 642 | 685 | 811 |
| social bonus on energy bills | 120 | 365 | 206 | 27 | 3 | 0 |
| one-off allowances | 347 | 392 | 441 | 374 | 341 | 189 |
| other measures affecting take-home pay | 139 | 82 | 142 | 162 | 195 | 116 |
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Source: our calculations on data from Istat, Banca d’Italia and BIMic.
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Note: “one-off allowances” include the 200- and 150-euros bonuses; “other measures affecting take-home pay” include the reduction of social security contributions paid by employees and the partial advance to 2022 of pension indexation.