Markus Riegler - Inflation and Government Response – Distributional Impact on Austrian Households

• Presenting author: Markus Riegler (Austrian Parliamentary Budget Office)

• Authors: Paul Eckerstorfer , Markus Riegler, and Friedrich Sindermann

• Session: C01C - Inflation [2] - Wednesday 9:00-10:30 - Senate Hall

• Slides: PDF

Austrian consumer prices increased by 8.6 % in 2022 and are expected to increase by further 7.1 % in 2023 and 3.8 % in 2024. The Austrian government has responded with a variety of measures targeting households amounting to between 1.3 % and 1.5 % of GDP in those years. We use the tax-benefit microsimulation model EUROMOD and statistically matched data from the Household Budget Survey to analyse the effects on disposable income and expenditures. Households with lower income are on average more heavily affected by inflation, primarily because of their higher average propensity to consume. In total, relief is disproportionally allocated to the upper half of the income distribution in absolute terms, but relative to income it is higher in the lower deciles. Together with nominal increases of other sources of income, households receive enough income to cover for their additional expenditures on average. However, as there is significant heterogeneity across households, this result doesn’t hold for all households, particularly not for those in the lower parts of the income distribution.