Inflation, fiscal policy and inequality

Henrique Basso, Maria Flevotomou, Maximilian Freier, Myroslav Pidkuyko, Antonio Amores, Simeon Bischl, Paola De Agostini, Silvia De Poli, Emanuele Dicarlo (), Sofia Maier, Esteban Garcia-Miralles, Mattia Ricci and Sara Riscado

No 330, Occasional Paper Series from European Central Bank

Abstract: 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 in lower-income households than in higher-income households. Fiscal measures compensated households for about a third of their welfare loss, though with significant differences between countries. At the same time, fiscal measures closed around 60% of the inequality gap between lower and higher-income households. 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. JEL Classification: D12, D31, D60, E31, H20, I30

Keywords: distributional effect; EUROMOD; fiscal policy; inflation; welfare effect (search for similar items in EconPapers)
Date: 2023-10
New Economics Papers: this item is included in nep-eec and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpops/ecb.op330~2e42ffb621.en.pdf (application/pdf)

Related works:
Working Paper: Inflation, fiscal policy and inequality (2024)
Working Paper: Inflation, Fiscal Policy and Inequality (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbops:2023330

Access Statistics for this paper

More papers in Occasional Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().