Amo es, An onio F. e al.
Wo king Pape
The cushioning e ec o he measu es adop ed in
Romania in esponse o he 2022 cos o li ing c isis
JRC Wo king Pape s on Taxa ion and S uc u al Re o ms, No. 06/2024
P o ided in Coope a ion wi h:
Join Resea ch Cen e (JRC), Eu opean Commission
Sugges ed Ci a ion: Amo es, An onio F. e al. (2024) : The cushioning e ec o he measu es adop ed
in Romania in esponse o he 2022 cos o li ing c isis, JRC Wo king Pape s on Taxa ion and
S uc u al Re o ms, No. 06/2024, Eu opean Commission, Join Resea ch Cen e (JRC), Se ille
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Amo es, A.F., Balaban, G., De Poli, S., Ga il, I.,
Le en i, C., Nae, T., Ricci, M.
2024
JRC Wo king Pape s on Taxa ion and S uc u al Re o ms No 06/2023
The cushioning e ec o he measu es
adop ed in Romania in esponse o he
2022 cos o li ing c isis
JRC138324
Se ille: Eu opean Commission, 2024
© Eu opean Union, 2024
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o li ing c isis, Eu opean Commission, Se ille, 2024, JRC138324.
Con ac in o ma ion
Name: An onio F. AMORES
Add ess: calle Inca Ga cilaso, Ed. EXPO, 410952 Se ille, SPAIN
Email: [email p o ec ed]
Tel.: +34 854 59 02 41
EU Science Hub
h ps://join - esea ch-cen e.ec.eu opa.eu
This documen is a publica ion by he Join Resea ch Cen e (JRC), he Eu opean Commission’s science and knowledge
se ice. I aims o p o ide e idence-based scien i ic suppo o he Eu opean policymaking p ocess. The con en s o his
publica ion do no necessa ily e lec he posi ion o opinion o he Eu opean Commission. Nei he he Eu opean
Commission no any pe son ac ing on behal o he Commission is esponsible o he use ha migh be made o his
publica ion. Fo in o ma ion on he me hodology and quali y unde lying he da a used in his publica ion o which he
sou ce is nei he Eu os a no o he Commission se ices, use s should con ac he e e enced sou ce. The designa ions
employed and he p esen a ion o ma e ial on he maps do no imply he exp ession o any opinion wha soe e on he
pa o he Eu opean Union conce ning he legal s a us o any coun y, e i o y, ci y o a ea o o i s au ho i ies, o
conce ning he delimi a ion o i s on ie s o bounda ies.
1
Con en s
Abs ac ...................................................................................................................................................................................................... 2
Acknowledgemen s .............................................................................................................................................................................. 2
Execu i e summa y .............................................................................................................................................................................. 3
1 In oduc ion ....................................................................................................................................................................................... 5
2 S a e o play and policy esponses in Romania............................................................................................................ 8
3 Da a and me hodology ............................................................................................................................................................ 11
3.1 The mic osimula ion model ........................................................................................................................................ 11
3.2 Scena ios ............................................................................................................................................................................... 12
4 Resul s ............................................................................................................................................................................................... 13
4.1 The impac o he in la iona y shock in Romania .......................................................................................... 13
4.2 The cushioning e ec o policy measu es ......................................................................................................... 16
4.3 Au oma ic e sus disc e iona y policy .................................................................................................................. 18
5 Conclusions ..................................................................................................................................................................................... 21
Re e ences ............................................................................................................................................................................................. 22
Lis o igu es ....................................................................................................................................................................................... 24
Lis o ables ......................................................................................................................................................................................... 24
2
Abs ac
In esponse o he ene gy c isis, which led o high in la ion, Romania, like o he EU Membe S a es,
in oduced a se ies o p ice- ela ed and income- ela ed measu es o cushion he nega i e impac on
households’ wel a e. Using EUROMOD and i s Indi ec Tax Tool ex ension, we assess he impac o
hese measu es on wel a e ac oss he income dis ibu ion, while dis inguishing be ween au oma ic
s abilise s and disc e iona y measu es. We ind ha hese measu es did no succeed in diminishing
en i ely he nega i e e ec o he in la iona y shock on he lowes -income popula ion, gi en ha ,
on he one hand, he shock was highe o low-income deciles, and, on he o he hand, he policies
applied we e no su icien ly a ge ed. Agains his backg ound, he use o a ge ed measu es is
wa an ed in o de o imp o e he wel a e e ec o such measu es on lowe -income households
and diminish income inequali ies esul ing om he ene gy c isis.
Acknowledgemen s
We a e indeb ed o Sal ado Ba ios and Dan Ma ei, and o he many people who ha e con ibu ed
o he de elopmen o EUROMOD. O iginally main ained, de eloped and managed by he Ins i u e
o Social and Economic Resea ch (ISER), since 2021 EUROMOD has been main ained, de eloped
and managed by he Join Resea ch Cen e (JRC) o he Eu opean Commission, in collabo a ion wi h
Eu os a and na ional eams om he EU Membe S a es. The esul s and hei in e p e a ion a e
he au ho s’ esponsibili y. The con en s o his a icle e lec only he posi ions o opinions o he
au ho s and no necessa ily hose o he Eu opean Commission o he Romanian Minis y o
Finance.
Au ho s
An onio F. AMORES
Geo giana BALABAN
Sil ia DE POLI
Ioana A. GAVRIL
Ch ysa LEVENTI
Tama a M. NAE
Ma ia RICCI
3
Execu i e summa y
The 2022 cos o li ing c isis, igge ed by he ene gy c isis, had a signi ican impac on households
in Romania, highligh ing he need o e ec i e policy measu es o mi iga e he nega i e e ec s o
in la ion. This pape assesses he impac o he policy measu es implemen ed by he Romanian
go e nmen on income inequali y and po e y using mic osimula ion echniques.
Policy Con ex
The Romanian go e nmen implemen ed a se ies o policy measu es o mi iga e he nega i e
e ec s o in la ion on households, including p ice caps and income suppo . These measu es we e
designed o cushion he impac o in la ion on households, pa icula ly he mos ulne able ones.
Main Findings
The in la iona y shock had a highly eg essi e impac on household wel a e, wi h he poo es
households expe iencing a signi ican ly highe wel a e loss han he iche ones. The impac o
in la ion was highes in he lowes income deciles, wi h he bo om income decile su e ing a
wel a e loss almos ou imes as la ge as he one o he nin h decile.
The policy measu es in oduced by he go e nmen , including p ice caps and income suppo , had a
cushioning e ec on household wel a e, bu did no ully neu alize he nega i e e ec o he
in la iona y shock on he poo es pa o he popula ion. The measu es did, howe e , bene i he
poo es households he mos , wi h he wel a e loss in he i s decile signi ican ly diminishing.
The use o a ge ed measu es is wa an ed o imp o e he wel a e e ec o lowe -income
households and u he diminish income inequali ies esul ing om he ene gy c isis.
The impac o au oma ic indexa ion alone was ound o be small, bu i ac ed as an au oma ic
s abilize and helped o p ese e he pu chasing powe o ulne able popula ion g oups.
Rela ed and Fu u e JRC Wo k
This pape con ibu es o he JRC's wo k on he dis ibu ional implica ions o policy measu es in
esponse o economic shocks. Fu u e wo k will ocus on assessing he impac o policy measu es on
income inequali y and po e y in o he EU Membe S a es, as well as e alua ing he e ec i eness
o di e en policy measu es in educing income inequali ies.
Quick Guide
— Wha was he impac o he 2022 cos o li ing c isis on households in Romania?
The in la iona y shock had a highly eg essi e impac on household wel a e, wi h he
poo es households expe iencing a signi ican ly highe wel a e loss han iche ones.
— Wha policy measu es we e implemen ed by he Romanian go e nmen o mi iga e he nega i e
e ec s o in la ion on households?
P ice caps and income suppo we e in oduced o cushion he impac o in la ion on
households.
— Wha was he e ec o hese policy measu es on household wel a e?
4
The measu es had a cushioning e ec on household wel a e, bu did no ully neu alize
he nega i e e ec o he in la iona y shock on he poo es pa o he popula ion.
The a ge ed measu es imp o ed he wel a e o lowe -income households and
diminished income inequali ies esul ing om he ene gy c isis.
The au oma ic indexa ion ac ed as an au oma ic s abilize and helped o p ese e he
pu chasing powe o ulne able g oups, albei o a small ex en .
5
1 In oduc ion
Consume p ices ha e isen signi ican ly since mid-2021, peaking owa ds he end o 2022 and
decele a ing a e wa ds. Alongside he g adual economic eco e y om he COVID-19 c isis, supply
chains aced a ious cons ain s, while ene gy demand was boos ed by con inued suppo om
go e nmen s and cen al banks. Se e al ac o s, including a se ies o wea he - ela ed e en s, ha e
u he s ained ene gy supply. Subsequen ly, he shock caused by Russia’s in asion o Uk aine,
which has signi ican ly dis up ed he ene gy ade in Eu ope, exace ba ed an exis ing misma ch
be ween ene gy demand and supply. Agains he backd op o an unp eceden ed c isis in he
Eu opean ene gy sys em, ene gy p ices eached his o ic highs in 2022, uelling eco d in la ion. In
his con ex , many go e nmen s implemen ed measu es o mi iga e he impac o highe ene gy
cos s on households. These can be di ided in o wo majo ca ego ies: p ice-side in e en ions (e.g.
e ail p ice caps, egula ed a i s and educed alue added ax (VAT) / excises o ene gy p oduc s)
and income suppo a ge ed a speci ic popula ion g oups.
The design and e ec i eness o such measu es ha e been he subjec o hea ed deba es, especially
wi hin in e na ional ins i u ions. The Eu opean Commission sugges ed a common app oach among
he EU Membe S a es o implemen ing measu es ela ed o he ene gy c isis, which would a ge
he mos ulne able g oups, be iscally a o dable and main ain incen i es o educing ene gy
consump ion and imp o ing ene gy e iciency (Eu opean Commission, 2022). The need o educing
ene gy demand has also been s essed by he Council o he Eu opean Union, which s a ed ha
ene gy measu es mus co e a limi ed amoun o consump ion, o main ain an incen i e o educe
demand. This would also ensu e iscal a o dabili y (Council o he Eu opean Union, 2022). The
O ganisa ion o Economic Co-ope a ion and De elopmen (OECD) a gued in a ou o mo e-
a ge ed measu es, shi ing om p ice-side measu es o income suppo , and highligh ed he need
o imp o e he design o he social wel a e sys ems in place. This would ensu e ha he suppo
p o ided is ai and e ec i e, wi h limi ed iscal and budge a y impac , sus aining ma ke
mechanisms o suppo ing he medium- o long- e m ansi ion o ca bon-neu ali y and ensu ing
ene gy secu i y (OECD, 2022).
The Romanian go e nmen has implemen ed bo h p ice and income-side policies. A p ice-capping
scheme o na u al gas and elec ici y p ices was in oduced in No embe 2021. O e ime, he
measu e was ex ended and modi ied and, acco ding o he p esen egula ions in o ce, i will be
alid un il Ma ch 2025. Se e al income suppo measu es we e also implemen ed, aimed a
diminishing he impac o high in la ion on ulne able popula ions. The mos impo an measu es
conce ned di ec ans e s/aids o ouche s o ood o o he goods g an ed o people a isk o
po e y o in si ua ions o ma e ial dep i a ion, including pensione s and s uden s om low-income
amilies. The ne iscal cos o he measu es (conside ing axes on wind all p o i s) was es ima ed
o be abou 0.6 % o he coun y’s g oss domes ic p oduc in 2022.
In his pape , we a emp o assess he impac o he policy measu es implemen ed by he
Romanian go e nmen in he con ex o he 2022 cos o li ing c isis on income inequali y and
po e y. Gi en hei complica ed design and he signi ican cos s associa ed wi h hem, assessing
hei dis ibu ional implica ions becomes o g ea impo ance. Ou me hodology in ol es a
coun e ac ual analysis based on mic osimula ion echniques. To conduc he analysis, we made use
o EUROMOD – he ax–bene i mic osimula ion model o he EU – and i s newly de eloped Indi ec
Tax Tool (ITT). The model’s unde lying mic oda a come om Eu os a ’s Eu opean Union S a is ics on
Income and Li ing Condi ions (EU-SILC) and he Household Budge Su ey (HBS).
6
As s a ed by Süssmu h and Wieschemeye (2022), he impac o in la ion on income inequali y is
a he unde explo ed. The au ho s ind ha , in he case o he Uni ed S a es, he in e ac ion
be ween in la ion and p og essi e axa ion signi ican ly a ou s low-income g oups in e ms o hei
ne income. Howe e , he indings o Zheng e al. (2023) sugges ha , in a model o g ow h based
on esea ch and de elopmen , in la ion has inconclusi e e ec s on income inequali y; i s impac can
be posi i e, nega i e o U-shaped, depending on he ela i e dominance o weal h and skills.
Since he unp eceden ed in la iona y p essu es ha e occu ed and he policies adop ed o cushion
hei nega i e e ec s ha e been implemen ed e y ecen ly, he li e a u e ega ding hese issues is
a he sca ce, and includes mixed esul s. Capeau e al. (2022) examine he impac o se e al
cushioning measu es implemen ed in Belgium in he con ex o he cu en ene gy c isis using
EUROMOD. They ind ha he agg ega e impac o he measu es is mainly in a ou o he lowes
income deciles, gi en ha he measu es o he han he VAT cu o elec ici y ha e been highly
a ge ed and he e o e p og essi e. O he s udies show ha low-income households ha e been he
mos a ec ed by he ene gy c isis and in la ion (Claeys and Gue a-Jean enaud, 2022). Va ga e al.
(2022) ind ha he di ec impac o he p ice inc eases has esul ed in a ise in he sha e o ene gy
consump ion as a p opo ion o income in he EU om 2.5 % o 3.75 % o median-income
households, and om 4.75 % o mo e han 6 % o he lowes income quin iles, which could
ampli y exis ing inequali ies. Howe e , Blake and Bulman (2022) ind ha low-income households
a e no always he mos a ec ed, as he la ges losses o eal income depend on he ype o
ene gy he households consume and he co esponding p ice inc eases, and on he sha e o ene gy
in household consump ion. In e e y Membe S a e, households in he lowes income deciles a e
mo e a ec ed by inc eased home ene gy p ices han hose in highe income quin iles. Howe e ,
when i comes o uel p ices, in se e al coun ies high-income households seem o be mo e
a ec ed han low-income households. Va ga e al. (2022) also analysed he impac o h ee
di e en measu es – uel ax educ ion, a ge ed income suppo and non- a ge ed income suppo
– on di e en ypes o households. Thei esul s show ha a ge ed income suppo is he mos
e ec i e measu e o ulne able households. Income policy measu es seem o ha e a lowe impac
on g eenhouse gas emissions han uel ax cu s do. These cu s also inc ease eliance on impo ed
ossil uels and p omo e he consump ion o ossil- uel-in ensi e du able goods, unde mining he
goals o he Eu opean G een Deal.
Some ecen pape s s udy he e ec o he ising in la ion on households’ well-being. The a e age
impac o he ene gy c isis on households’ cos o li ing was es ima ed o be up o 10 % in 2022 in
he EU (A i e al., 2022; Menyhé , 2024). While he impac a ied signi ican ly ac oss coun ies and
egions, i s e ec s ha e been ound o be mos ly eg essi e (A i e al., 2022; Claeys and Gue a-
Jean enaud, 2022). Vulne able popula ion g oups in cen al and eas e n Eu opean coun ies, such as
low-income households, la ge amilies, he u al popula ion and olde people, seem o be he mos
a ec ed (Menyhé , 2024). In la ion is es ima ed o inc ease ma e ial and social dep i a ion by 2
pe cen age poin s in he EU, while also inc easing ene gy and mone a y po e y by 5 pe cen age
poin s. These e ec s a e se e al imes highe in some Membe S a es (Menyhé , 2024).
Ou con ibu ion o he li e a u e is wo old. To he bes o ou knowledge, his is he i s pape
assessing he dis ibu ional impac o he measu es implemen ed in he con ex o he ecen cos
o li ing c isis in Romania, including bo h he income-side measu es, a ge ed a speci ic popula ion
g oups, and hose ela ed o p ices (i.e. p ice capping and uel p ice educ ion), conce ning all he
ci izens o he coun y. Using mic osimula ion echniques, we a e able o es ima e he cushioning
e ec o each o hose measu es h oughou he income dis ibu ion. The second no el aspec o
his wo k is ha we a emp o sepa a e he impac o he abo emen ioned disc e iona y measu es
om he impac o policies ha ac as au oma ic s abilise s in he e en o high in la iona y
13
4 Resul s
4.1 The impac o he in la iona y shock in Romania
In his sec ion, we discuss he impac o he in la iona y shock on Romanian households. To isola e
he impac o in la ion, we conside he coun e ac ual scena io, in which he go e nmen ’s
esponse is silen – ha is, no policies a e adop ed in esponse o he in la iona y shock. E ec i ely,
household wel a e ac oss he income dis ibu ion is a ec ed by wo ac o s: (i) he inc ease in
consump ion expendi u e expe ienced by households ac oss income deciles and (ii) he inc ease in
nominal income. Bo h ac o s a ec households he e ogeneously.
In pa icula , he impac o inc easing consump ion expendi u e gene ally di e s ac oss he income
dis ibu ion because o di e ences in consump ion pa e ns among households. As a esul o he
p ice su ge in 2022, low-income households we e mos a ec ed by he inc ease in consump ion
expendi u e, o wo easons. Fi s ly, hey gene ally ace highe e ec i e a es o in la ion, as
depic ed in Figu e 2. Tha is because households a he bo om o he income dis ibu ion spend a
la ge sha e o hei income on necessi ies such as home hea ing and ood. These we e p ecisely
he main d i e s o he 2022 p ice su ge, as shown by Figu e 3. Secondly, low-income households
gene ally consume mo e han hey ea n, and hence ha e limi ed abili y o inance he ex a
expendi u e bu den b ough abou by in la ion. As a esul , hey gene ally su e a la ge wel a e
loss. Likewise, no e ha he impac o p ice policies in oduced by he go e nmen was sligh ly
lowe o households in he i s ou deciles o he income dis ibu ion, gi en ha hei ca uel
consump ion (which was empo a ily subsidised by he go e nmen ) is a he low. On a e age,
p ice- ela ed policies educed he e ec i e a e o in la ion by 4.8 pe cen age poin s ac oss he
income dis ibu ion ( his can be seen by compa ing coun e ac ual and ac ual in la ion a es in
Figu e 2).
Figu e 2. E ec i e a es o in la ion ac oss income deciles (%)
Sou ce: Au ho s’ calcula ions based on EUROMOD esul s.
Po en ial in la ion
cushioned by policies
Ac ual in la ion
Coun e ac ual in la ion (no policies)
0
2
4
6
8
10
12
14
16
12345678910
In la ion (%)
Income decile
14
Figu e 3. In la ion by main p oduc ca ego ies (A) and hei con ibu ions o gene al in la ion (B)
(A)
(B)
Sou ces: Eu os a (p c_hicp _man , p c_hicp_aind, p c_hicp_inw).
On op o he unequal impac o in la ion on consump ion expendi u e, nominal income g ow h
ac oss income g oups was also unequal, as shown in Figu e 4. Nominal wage g ow h is simula ed
0 5 10 15 20 25 30
CP01 Food and non-alcoholic be e ages
CP02 Alcoholic be e ages, obacco and na co ics
CP03 Clo hing and oo wea
CP04 Housing, wa e , elec ici y, gas and o he uels
CP05 Fu nishings, household equipmen and ou ine household…
CP06 Heal h
CP07 T anspo
CP08 Communica ions
CP09 Rec ea ion and cul u e
CP10 Educa ion
CP11 Res au an s and ho els
CP12 Miscellaneous goods and se ices
Annual change (%)
4.1
12.0
0
2
4
6
8
10
12
2021 2022
Pe cen age poin s
O he
T anspo
Housing, wa e , elec ici y, gas
and o he uels
Alcoholic be e ages, obacco and
na co ics
Food and non-alcoholic be e ages
15
using EUROMOD up a ing ac o s (
5
). Up a ing ac o s upda e sou ces o income, pensions and non-
simula ed social bene i s acco ding o hei (es ima ed) g ow h be ween he yea o which he da a
e e s (e.g. 2019) and he yea s o he simula ions (e.g. 2021 and 2022). While hese a es o
g ow h a e he same ac oss indi iduals (e.g. we do no simula e he income-decile-speci ic g ow h
a e o ea nings), he di e en composi ion o income o households a di e en poin s o he
income dis ibu ion means he nominal income g ow h was ac ually qui e di e en ac oss income
g oups. To a ionalise his, one migh hink o he di e ence be ween he income sou ces o he
bo om deciles and o he op ones. Households a he bo om o he income dis ibu ion ypically
ely on pensions and social bene i s, while, o households si ing a he op o he income
dis ibu ion, ma ke income is gene ally he main d i e o nominal income g ow h (
6
). Income g ow h
o he i s wo deciles s ood a a ound 16 %, dec easing o jus o e 12 % o he hi d decile and
o a ound 10 % o he ou h and i h deciles, while being s able a ound 9 % o he second hal
o he income dis ibu ion.
Figu e 4. Income g ow h by income decile in 2022 (%)
Sou ce: EUROMOD up a ing ac o s.Figu e
Figu e 5 p esen s he o e all impac o he in la iona y shock on household wel a e h ough income
and consump ion, in he absence o a policy esponse. As we can app ecia e om he igu e, he
impac is highly eg essi e: he i s income decile su e ed a wel a e loss almos ou imes as
(
5
) De ailed in o ma ion on he da a sou ce o each up a ing ac o is documen ed in he EUROMOD coun y epo o
Romania.
(
6
) In his speci ic case, pa o he inc ease in nominal income a he bo om o he dis ibu ion is explained by policy
changes in means- es ed bene i s, no ela ed o he ene gy c isis.
0
5
10
15
20
25
30
35
40
1 2 3 4 5 6 7 8 9 10
Income g ow h (%)
Income decile
16
la ge as he one o he nin h decile, while he iches 10 % o he households appea leas
a ec ed. E en hough he income g ow h o he lowes incomes deciles was highe han o he
highes ones, he impac o in la ion on household wel a e is almos i e imes as la ge o he
bo om as o he op, gi en he di e ences in he s uc u e o consump ion expendi u e ac oss he
income dis ibu ion.
Figu e 5. Impac o he in la iona y shock on household wel a e (no policies)
Sou ce: Au ho s’ calcula ions based on EUROMOD esul s
4.2 The cushioning e ec o policy measu es
F om he p e ious sec ion, we lea n ha in absence o policy measu es he impac o he
in la iona y shock would ha e been leas signi ican o he iches households. The impac would
ha e been a he d ama ic o he lowes -income households, wi h he bo om income decile
su e ing a loss o almos 40 % o hei wel a e compa ed wi h 2021. We now conside o wha
ex en he policy measu es in oduced by he Romanian go e nmen (discussed in de ail in
Sec ion 2E o ! Re e ence sou ce no ound.) we e able o shel e households ac oss income
g oups. In doing so, we b eak down he ole played by income-side measu es, mos ly aimed a
suppo ing household income, on he one hand; and p ice-side measu es, mos ly aimed a limi ing
he inc ease in p ices, on he o he hand. We ecall ha he income-side measu es we e highly
a ge ed a ulne able social g oups, while p ice-side policies bene i ed households ac oss he
boa d.
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
12345678910
Wel a e
a ia ion (%)
Income decile
17
Figu e 2. Impac o in la ion on household wel a e wi h go e nmen policies
Sou ce: Au ho s’ calcula ions based on EUROMOD esul s
Figu e Figu e 2 displays he impac o in la ion on household wel a e conside ing he cushioning
e ec o go e nmen measu es. F om he igu e, we can see how he poo e households ha e
bene i ed he mos om go e nmen measu es. In pa icula , he wel a e loss in he i s decile has
signi ican ly diminished ( om 38.7 % in he absence o he measu es o 5.4 % wi h he measu es
applied). Be e -o households ha e also bene i ed o such an ex en ha hei wel a e impac
becomes posi i e. This means ha hese households ha e ac ually imp o ed hei p e-in la iona y
shock si ua ion. This is la gely because a signi ican pa o he cushioning e ec was de e mined
by p ice-side measu es, as can also be seen in he budge sha e o p ice measu es (see
Figu e Figu e 3). O e all, gene ous iscal measu es wen a long way owa ds coun e ac ing he
nega i e impac on household wel a e; howe e , he g ea eliance on p ice measu es mean ha
go e nmen suppo was la gely un a ge ed. As a esul , signi ican losses emained
uncompensa ed among he lowes -income households.
Nominal income g ow h
Disc e iona y policies
(p ice-side)
Disc e iona y policies
(income-side)
-50
-40
-30
-20
-10
0
10
20
30
40
50
1 2 3 4 5 6 7 8 9 10
Wel a e a ia ion (%)
Income decile
In la ion e ec
To al e ec
18
Figu e 3. Cos o measu es by ype
NB: GDP, g oss domes ic p oduc ; SMEs, small and medium-sized en e p ises.
Sou ce: Romanian Minis y o Finance.
4.3 Au oma ic e sus disc e iona y policy
Apa om he disc e iona y policies implemen ed in he unexpec ed con ex o high in la ion and
aimed a cushioning i s nega i e impac on he popula ion, o he elemen s o he Romanian sys em
ac ed as au oma ic s abilise s o educe he impac o in la ion. In pa icula , hese elemen s
included he indexa ion o ce ain income ans e s, such as old-age and minimum pensions, he
allowance o child en and he minimum wage. Acco ding o he legisla ion, hese policies a e mean
o be (pa ially) indexed o in la ion and/o o he indica o s, such as eal wage g ow h, o ensu e he
p ese a ion o he pu chasing powe o he mos ulne able households. Mos o en in Romania
such indexa ion akes place in an ad hoc way, h ough de oga ion om ce ain ules. Fo ins ance,
al hough a Swiss ule o pension indexa ion has been in ended o be en o ced by law, in ecen
yea s pension indexa ion has been done in an ad hoc way. Despi e de oga ions om hese
indexa ion ules, such policies do ac as au oma ic s abilise s o cushion he impac o in la ion.
Table 2 depic s he popula ion co e age and mon hly alues o hose policies in 2022. I also
p o ides a b eakdown o he ac ual indexa ion ules applied in 2022 in o disc e iona y and non-
disc e iona y (au oma ic s abilise s) ules. We can see ha he sha e o he popula ion bene i ing
om hese policies is a he high. Fo ins ance, in 2022 Romania egis e ed almos 5 million
pensione s (26 % o he o al popula ion), o whom abou 20 % we e paid he social allowance o
pensione s (a op-up amoun ha b ings he ne pension ecei ed o a minimum h eshold). In
addi ion, he allowance o households wi h child en aged 2–18 yea s bene i ed almos 19 % o he
o al popula ion, while abou 23 % o Romanian employees ea ned he minimum wage (1.2 million
employees, o 6.3 % o he o al popula ion).
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90
Compensa ion o ene gy bills o SMEs and o he
ins i u ions
Compensa ion o ene gy bills o households
Fuel eimbu semen
Suppo o low-income pensione s
Financial o aid pensione s
Food ouche s
P ice measu es
Income measu es
Pe cen age o GDP
19
Table 2. S a u o y e sus disc e iona y indexa ion o ce ain policies in Romania, 2022
Policy
Popula ion
sha e
(%)
Indexa ion
Mon hly
alue
(EUR)
Ac ual
(%)
S a u o y
(au oma ic
s abilise )
(%)
Disc e iona y
(%)
Old-age pensions
(pension poin alue (*))
20.8
10
5.0
5.0
321
Social allowance o
pensione s
(minimum pension)
5.2
25
5.3
19.7
202
Allowance o child en
aged 2–18 yea s
18.8
13.5
5.3
8.2
49
Minimum g oss wage
6.3
11
5.3
5.7
517
(*) An indica o used o calcula e pensions. Acco ding o law, he pension poin alue is indexed e e y yea in
acco dance wi h he indexa ion ule: in la ion a e + 50 % o he a e o g ow h o he eal wage.
Sou ce: Romanian Minis y o Finance.
Gi en he ela i ely la ge sha e o he popula ion bene i ing om hese indexa ion ules (o e
50 %), and as he annual a e age in la ion a e s ood a 13.8 % in 2022, he abo emen ioned
policies signi ican ly con ibu ed o he main enance o households’ pu chasing powe . The wel a e
impac o di ec disc e iona y policies, p ice measu es, disc e iona y indexa ion and o he policies,
by income decile, is depic ed in Figu e 8. Figu e 9 spli s he o e all policy indexa ion e ec in o
disc e iona y and au oma ic (s a u o y) e ec s. As al eady discussed, in la ion had a la ge nega i e
impac on he lowes income deciles, especially he poo es one. Ma ke income de elopmen s had
a mo e p onounced posi i e impac on iche households, and a sligh ly nega i e e ec on
households in he i s decile. As expec ed, he e ec s o bo h au oma ic and disc e iona y
indexa ion we e mo e a ou able o he lowe hal o he income dis ibu ion, bene i ing ich
households less. S ill, as shown in Figu e 9, disc e iona y indexa ion was mo e p og essi e han
au oma ic indexa ion. Likewise, p ice measu es posi i ely a ec ed he i s h ee deciles o he
la ges ex en . They also posi i ely a ec ed he es o households, gi en ha p ice caps we e
a ge ed based on no income bu ene gy consump ion. Howe e , di ec disc e iona y policies we e
ound o ha e mos ly a ou ed he poo es 50 % o he popula ion, wi h an insigni ican impac on
he iches hal o he income dis ibu ion, as hese measu es we e a ge ed a low-income
households.
20
Figu e 4. Impac o disc e iona y and au oma ic measu es on household’s wel a e
Sou ce: Au ho s’ calcula ions based on EUROMOD esul s.
Figu e 5. Disc e iona y e sus au oma ic indexa ion
Sou ce: Au ho s’ calcula ions based on EUROMOD esul s.
-50
-40
-30
-20
-10
0
10
20
30
40
50
12345678910
Wel a e a ia ion (%)
Income decile
Disc e iona y
di ec policies
P ice measu es
Disc e iona y
indexa ion
O he policies
Au oma ic
indexa ion
Ma ke income
In la ion
Wel a e e ec s
Au oma ic
indexa ion
Disc e iona y
indexa ion
0
1
2
3
4
5
6
7
8
9
10
1 2 3 4 5 6 7 8 9 10
Wel a e Va ia ion (%)
Income decile
21
5 Conclusions
Romania exhibi s one o he highes a es o po e y and inequali y in he EU. The ecen inc ease in
he cos o li ing has made he popula ion o Romania e en mo e ulne able, igge ing a bold
policy esponse om he go e nmen h ough he adop ion o bo h p ice and income-side suppo
measu es.
This pape uses mic osimula ion echniques o assess he impac o he 2022 in la iona y shock on
Romanian households and he e ec o he policy measu es adop ed by he go e nmen , in e ms
o wel a e and inequali ies. We cons uc h ee coun e ac ual scena ios o depic he ac ual impac
o he in la iona y shock on he popula ion: one in he p esence o p ice and income-side suppo
measu es, one in he hypo he ical absence o hese measu es and one ha cap u es he cushioning
e ec o disc e iona y policy measu es in oduced by he Romanian go e nmen .
We ind ha he in la iona y shock had an une en e ec on households h ough consump ion
expendi u es. The impac was highe on lowe -income households han on highe -income ones,
gi en ha hey spend a la ge sha e o hei income on basic needs, o example home hea ing and
ood – which we e he main d i e s o he 2022 p ice su ge – and, a he same ime, sa e li le o
no a all. Mo eo e , he e ec gene a ed by nominal income g ow h also di e s signi ican ly along
he income dis ibu ion, pa ially o se ing di e ences be ween highe - and lowe -income
households. Howe e , he in la iona y shock, es ed in he absence o policy measu es, emained
highly eg essi e, wi h poo e households expe iencing a signi ican ly highe wel a e loss han iche
ones.
As ega ds he impac o he policy measu es adop ed by he go e nmen (income-side measu es,
p ice-side measu es and disc e iona y indexa ion), we ind ha households in he i s decile o he
income dis ibu ion bene i ed he mos . Howe e , he la ge impac o he in la iona y shock on
hese households was such ha signi ican losses emained. On op o disc e iona y policies, some
au oma ic indexa ion measu es ela ed o in la ion we e implemen ed ha mainly ac ed as
au oma ic s abilise s and helped o p ese e, a leas pa ly, he pu chasing powe o some o he
ulne able g oups o he popula ion. S ill, he impac o au oma ic indexa ion alone was ound o be
small.
O e all, we conclude ha hese disc e iona y and non-disc e iona y measu es did no ully
neu alise he nega i e e ec o he in la iona y shock on he poo es pa o he popula ion. This is
because, on he one hand, he shock was highe o low-income deciles, and, on he o he hand, he
policies applied we e no su icien ly a ge ed o ensu e his ou come. The e o e, households in he
i s income decile aced a sligh wel a e educ ion, while all he o he deciles eco ded a highe
le el o wel a e han he p e ious yea , wi h deciles 2 and 3 bene i ing he mos . The use o
a ge ed measu es is he e o e wa an ed in o de o imp o e he wel a e e ec o lowe -income
households and u he diminish income inequali ies esul ing om he ene gy c isis.
22
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