Energy price increases and mitigation policies: Redistributive effects on Italian households

Since the second half of 2021, there has been a sharp increase in the prices of energy goods (electricity, heating gas, fuels) as well as of food, leading to inflation rates never experienced in Italy in the last forty years. Such high inflation rates prompted the Italian government to take measures to curb the prices of energy products, to increase social bonuses on electricity and gas bills, and to provide one-off allowances to households. The crucial question is what impact the price increases have had on households and whether the measures taken have protected the household sector from these increases. Therefore, we perform a microsimulation exercise on the period July 2021-March 2023 to quantify the effects of the price increases and of the measures on household expenditure and income. Our results indicate that the regressive impact of price increases was mitigated by the price containment measures due to their progressive nature and that the contribution of one-off allowances and social bonuses was very relevant. In 2022, the year in which households benefitted from the measures for twelve months, the fiscal policy interventions also succeeded in reducing inequality, the at-risk-of-poverty rate and energy poverty.