Premium
Relative Price Changes and Households' Welfare in Italy
Author(s) -
Cepparulo Alessandra,
Gastaldi Francesca,
Liberati Paolo,
Pisano Elena
Publication year - 2012
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2012.00515.x
Subject(s) - economics , inflation (cosmology) , welfare , price index , consumer price index (south africa) , currency , index (typography) , relative price , macroeconomics , price level , monetary economics , monetary policy , market economy , physics , theoretical physics , world wide web , computer science
The entrance of Italy in the Euro area in 2001 has given rise to a wide debate about the perception of inflation on households' well‐being. However, most of the debate has involved the measurement of the “correct” consumer price index at the national level. Much less analysis has been carried out on the distributional consequences of inflation on every household. The paper addresses this issue by performing a microsimulation analysis of the impact of inflation on Italian households in the period 1997–2007. It is shown that the impact of inflation has an ambiguous path over the period, with a large concentration of welfare losses around the introduction of the Euro currency. In particular, it is found that poorer and larger households are severely hurt by inflation and that the prices of gas and gasoline are largely responsible for determining the living conditions of Italian households.