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Inflation Inequality In The United States

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  • Bart Hobijn
  • David Lagakos

Abstract

Different spending patterns across households and differences in price increases across goods and services lead to unequal levels of inflation faced by different households. In this paper we measure the degree of inequality in inflation across U.S. households for the period 1987-2000. The broad picture that emerges from our results is that over our whole sample period there are substantial differences in the inflation experiences across U.S. households. We find that the cost of living increases were generally higher for the elderly, in large part because of their health care expenditures, and that the cost of living of poor households is most sensitive to the, historically large, fluctuations in gasoline prices. Still, when looking at the whole population, we find that individual households that are confronted with high inflation in one year do not generally face high inflation in the subsequent year as well. Copyright 2005 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.

Volume (Year): 51 (2005)
Issue (Month): 4 (December)
Pages: 581-606

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Handle: RePEc:bla:revinw:v:51:y:2005:i:4:p:581-606

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References

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  1. Danny Quah, 1992. "Empirical cross-section dynamics in economic growth," Discussion Paper / Institute for Empirical Macroeconomics 75, Federal Reserve Bank of Minneapolis.
  2. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
  3. Ernst R. Berndt & Iain M. Cockburn & Douglas L. Cocks & Arnold M. Epstein & Zvi Griliches, 1998. "Is Price Inflation Different for the Elderly? An Empirical Analysis of Prescription Drugs," Forum for Health Economics & Policy, De Gruyter, vol. 1, pages 3.
  4. Robert T. Michael, 1979. "Variation Across Household in the Rate of Inflation," NBER Working Papers 0074, National Bureau of Economic Research, Inc.
  5. Bart Hobijn & David Lagakos, 2003. "Social security and the consumer price index for the elderly," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue May.
  6. Quah, Danny T, 1997. " Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
  7. Hagemann, Robert P, 1982. "The Variability of Inflation Rates across Household Types," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 494-510, November.
  8. David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
  9. Stephen G. Cecchetti, 1996. "Measuring Short-Run Inflation for Central Bankers," NBER Working Papers 5786, National Bureau of Economic Research, Inc.
  10. Michael, Robert T, 1979. "Variation across Households in the Rate of Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(1), pages 32-46, February.
  11. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(2), pages 273-78, May.
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Citations

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Cited by:
  1. Bart Hobijn & Kristin Mayer & Carter Stennis & Giorgio Topa, 2009. "Household inflation experiences in the U.S.: a comprehensive approach," Working Paper Series 2009-19, Federal Reserve Bank of San Francisco.
  2. Dew-Becker, Ian & Gordon, Robert J, 2008. "Controversies about the Rise in American Inequality: A Survey," CEPR Discussion Papers 6817, C.E.P.R. Discussion Papers.
  3. Gervais, Martin & Klein, Paul, 2009. "Measuring consumption smoothing in CEX data," Discussion Paper Series In Economics And Econometrics 0906, Economics Division, School of Social Sciences, University of Southampton.
  4. Alessandra Cepparulo & Francesca Gastaldi & Paolo Liberati, 2010. "The distributional and welfare impact of inflation in Italy," Working Papers 134, University of Rome La Sapienza, Department of Public Economics.
  5. Leslie McGranahan & Anna L. Paulson, 2011. "How do benefit adjustments for government transfer programs compare with their participants' inflation experiences?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 113-136.
  6. Morné Oosthuizen, 2007. "Consumer Price Inflation across the Income Distribution in South Africa," Working Papers 07129, University of Cape Town, Development Policy Research Unit.
  7. Goni, Edwin & Lopez, Humberto & Serven, Luis, 2006. "Getting realabout inequality : evidence from Brazil, Colombia, Mexico, and Peru," Policy Research Working Paper Series 3815, The World Bank.
  8. Jason Loughrey & Cathal O’Donoghue, 2012. "The Welfare Impact of Price Changes on Household Welfare and Inequality 1999-2011," The Economic and Social Review, Economic and Social Studies, vol. 43(1), pages 31–66.
  9. Leslie McGranahan & Anna Paulson, 2005. "The incidence of inflation: inflation experiences by demographic group: 1981-2004," Working Paper Series WP-05-20, Federal Reserve Bank of Chicago.
  10. Michael Grimm & Isabel Günther, 2005. "Inflation Inequality and the Measurement of Pro-Poor Growth," Working Papers DT/2005/08, DIAL (Développement, Institutions et Mondialisation).
  11. Roberta Colavecchio & Ulrich Fritsche & Michael Graff, 2011. "Inflation Inequality in Europe," Macroeconomics and Finance Series 201102, Hamburg University, Department Wirtschaft und Politik.
  12. Steven F. Koch & Adel Bosch, 2009. "Inflation and the Household: Towards a Measurement of the Welfare Costs of Inflation," Working Papers 200917, University of Pretoria, Department of Economics.

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