This study investigates the inflationary effects of the rapid fiscal expansion during the COVID-19 pandemic in Korea and evaluates how heterogeneous inflation across households altered the redistributive impact of social protection. Using a Structural Vector Autoregression (SVAR) with major macroeconomic indicators from 2000 to 2023, we find that fiscal shocks exert a statistically significant and positive effect on consumer price inflation, contributing approximately 0.1-0.35 percentage points during the pandemic period. Heterogeneous inflation is computed using household-specific expenditure weights, showing that low-income households generally experienced higher inflation due to essential-goods consumption. However, during the mid-pandemic phase, inflation became temporarily more progressive, as high-income households faced sharper price increases in transportation, accommodation, and service-related categories.
Consequently, real-income inequality widened in most quarters, and the redistributive effect of public transfers―measured by the Gini index―declined by up to 0.1 percentage points, although this pattern reversed during periods of progressive inflation. Importantly, the redistributive consequences of inflation crucially depend on which sectors fiscal demand is channeled to and on the design features of social benefits. Universal tax cuts or broadly distributed cash transfers can be fiscally costly while yielding limited redistribution, and at times even regressive outcomes. These findings suggest the need to transition from broad, crisis-driven support toward more targeted stabilizers once uncertainty recedes, highlighting the value of semi-automatic rules for future fiscal responses.