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Anti-Inflation Policy Benefits the Poor: Evidence from Subjective Well-Being Data

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Author Info

  • Heinz Welsch

    ()
    (University of Oldenburg, Department of Economics)

  • Jan Kühling

    ()
    (University of Oldenburg, Department of Economics)

Abstract

Using subjective well-being data for more than 91,000 individuals in 30 OECD countries, 1990-2008, we study how people’s implicit aversion towards inflation varies with income and other socio-economic characteristics. While inflation aversion decreases with income, it increases with the education level. Contrary to previous findings using statedpreferencemethods, these relationships apply not only to absolute inflation aversion, but also to the aversion towards inflation relative to unemployment. These results survive several robustness checks. The differing results concerning the roles of income and education suggest that different dimensions of being disadvantaged influence the well-being effects of inflation in different ways.

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File URL: http://www.vwl.uni-oldenburg.de/download/DP_V-343_11.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Oldenburg, Department of Economics in its series Working Papers with number V-343-11.

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Length: 37 pages
Date of creation: Dec 2011
Date of revision: Dec 2011
Publication status: Published in Oldenburg Working Papers V-343-11
Handle: RePEc:old:dpaper:343

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Postal: 26111 Oldenburg
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Web page: http://www.vwl.uni-oldenburg.de/
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Related research

Keywords: inflation; unemployment; poverty; social incidence; subjective well-being;

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References

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  1. Easterly, William & Fischer, Stanley, 2000. "Inflation and the poor," Policy Research Working Paper Series 2335, The World Bank.
  2. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  3. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," Research Papers 1751r, Stanford University, Graduate School of Business.
  4. Jayadev, Arjun, 2006. "Differing preferences between anti-inflation and anti-unemployment policy among the rich and the poor," Economics Letters, Elsevier, vol. 91(1), pages 67-71, April.
  5. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
  6. Scheve, Kenneth, 2004. "Public Inflation Aversion and the Political Economy of Macroeconomic Policymaking," International Organization, Cambridge University Press, vol. 58(01), pages 1-34, February.
  7. Arjun Jayadev, 2008. "The class content of preferences towards anti-inflation and anti-unemployment policies," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 161-172.
  8. Justina AV Fischer, 2010. "Accounting for Unobserved Country Heterogeneity in Happiness Research: Country Fixed Effects versus Region Fixed Effects," CEIS Research Paper 164, Tor Vergata University, CEIS, revised 28 May 2010.
  9. Heinz Welsch, 2011. "The magic triangle of macroeconomics: how do European countries score?," Oxford Economic Papers, Oxford University Press, vol. 63(1), pages 71-93, January.
  10. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
  11. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  12. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
  13. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
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