Fiscal austerity and income distribution in Italy

The aim of this chapter is to evaluate the main effects on the incomes of Italian households of the fiscal consolidation measures that the government has introduced after the start of the great recession in 2008, with the objective of reducing the deficit of the public budget. The questions addressed in this chapter can be summarised as follows: a) What is the overall distributive impact of austerity measures on the income distribution of Italian households? b) Which social and economic groups have been more affected? c) What is the relationship between the changes in income distribution in the last decade in Italy and the changes produced by the policy measures? d) When designing which measures to introduce, did the government take into account the underlying changes in income distribution during the crisis? The second section describes the evolution of income inequality and poverty before and after the onset of the great recession, while the third provides some details of the simulation method and presents the distributive effects of the austerity package on Italian households. Finally, the fourth section discusses these results and puts them in a more general context.