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Mattia Ricci
- 23 November 2023
- THE ECB BLOGWith rising inflation, people need more money to buy the same amount of goods. Governments can take measures to counteract this negative effect. The ECB Blog finds that recent euro area policies to support households were successful at first – but also very costly.Details
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H31 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Household
H53 : Public Economics→National Government Expenditures and Related Policies→Government Expenditures and Welfare Programs
- 16 October 2023
- OCCASIONAL PAPER SERIES - No. 330Details
- 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 Code
- D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
D60 : Microeconomics→Welfare Economics→General
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
I30 : Health, Education, and Welfare→Welfare, Well-Being, and Poverty→General