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Consumption, savings and wealth

Research articles · Nov 25, 2025

The redistributive effects of inflation: a microsimulation analysis for Italy

Nicola Curci, Marco Savegnago, Giordano Zevi, Roberta Zizza

Banca d’Italia, Directorate General for Economics, Statistics and Research, Rome, Italy

Volume 18(3) Winter 2025

Cite as: N. Curci, M. Savegnago, G. Zevi, R. Zizza; 2025; The redistributive effects of inflation: a microsimulation analysis for Italy; International Journal of Microsimulation; 18(3); 87–100. doi: 10.34196/ijm.00330

Abstract

We analyse the impact of the marked and unexpected increase in inflation recorded in 2021 and 2022 on Italian households’ purchasing power. Exploiting microsimulation tools we quantify the extent to which government measures supporting households’ incomes and lessening energy price hikes mitigated the distributional impact of the inflationary shock. We show that, if evaluated on the basis of both their cost for the public finances and their impact on inequality, the interventions explicitly targeted towards the less well-off households were the most effective, while the untargeted reductions of energy and fuel prices were the least effective.

This article contains 9 figures and 2 tables.

Figures

Figure 1. Harmonized inflation rate (HICP).
Figure 2. Observed and simulated inflation rates and expenditure increase.
Figure 3. Household-specific inflation rates and equivalent disposable income.
Figure 4. Average propensity to consume by quintiles of equivalent disposable income
Figure 5. Incidence of the inflationary shock by quintiles of equivalent disposable income.
Figure 6. Government measures: targeting (bn. euros) and incidence on disposable income, by quintiles of equivalent income.
Figure 7. incidence of the shock and measures targeting (bn euros) by deciles of ISEE.
Figure 8. Analysis by prevailing sources of income in the household.
Figure 9. Pre- and post-shock inequality in purchasing power

Tables

Table 1. Impact of the inflationary shock on households’ purchasing power (bn euros).
Estimated total effect without Government intervention81.3
- minus reduction of general system charges, excise duties and VAT16.2
- minus increase of the social bonus on energy bills3.1
- minus one-off allowances8.9
- minus other measures affecting take-home pay3.6
= Effective impact including Government intervention49.6

Source: our calculations on data from Istat, Banca d’Italia and BIMic.

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.

Table 2. Impacts on average households’ purchasing power (euros)
TotalQuintiles of disposable income
12345
Total effect without Government intervention: (a)3,1862,3052,6753,1603,4974,292
Total effect with Goverm-nment intervention: (b)1,9449981,3201,9552,2733,176
Attenuation of the total effect due to Government intervention: (a)-(b) of which1,2411,3071,3561,2051,2241,115
measures on general system charges, excise duties and VAT635468567642685811
social bonus on energy bills1203652062730
one-off allowances347392441374341189
other measures affecting take-home pay13982142162195116

Source: our calculations on data from Istat, Banca d’Italia and BIMic.

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.