Inflation, fiscal policy and inequalityThe distributional impact of fiscal measures to compensate for consumer inflation

  1. Amores, Antonio F. 1
  2. Basso, Henrique 2
  3. Bischl, Johannes Simeon 3
  4. De Agostini, Paola 1
  5. De Poli, Silvia 1
  6. Dicarlo, Emanuele 4
  7. Flevotomou, Maria 5
  8. Freier, Maximilian 3
  9. Maier, Sofia 1
  10. García-Miralles, Esteban 2
  11. Pidkuyko, Myroslav 2
  12. Ricci, Mattia 1
  13. Riscado, Sara 6
  1. 1 Joint Research Centre
    info

    Joint Research Centre

    Bruselas, Bélgica

  2. 2 Banco de España
    info

    Banco de España

    Madrid, España

    ROR https://ror.org/02f26yq04

  3. 3 European Central Bank
  4. 4 Banca D'Italia
  5. 5 Bank of Greece
  6. 6 Banco de Portugal
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Revista:
Documentos ocasionales - Banco de España

ISSN: 1696-2222

Año de publicación: 2024

Número: 18

Tipo: Documento de Trabajo

DOI: 10.53479/36624 DIALNET GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Documentos ocasionales - Banco de España

Resumen

This paper analyses the distributional impact of high consumer inflation in the euro area and government measures to compensate households in 2022. The study uses the tax-benefit microsimulation model for the European Union (EUROMOD) with microdata as the input – EU statistics on income and living conditions (EU-SILC) and household budget surveys (HBS) – to quantify the distributional impact of inflation, income support measures and measures aimed at containing prices. The analysis confirms that purchasing power and welfare were more severely affected by the 2022 inflation surge among lower-income households than among higher-income households. Fiscal measures compensated households for about a third of their welfare loss, though with significant differences across countries. At the same time, fiscal measures reduced the inequality gap between lower and higher-income households by around 60%. Most fiscal measures were not particularly well targeted at low-income households, resulting in a higher than necessary fiscal burden to cushion the distributional impact of the inflationary shock.

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