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Inflation Inequality In The United States

  • Bart Hobijn
  • David Lagakos

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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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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  1. Pollak, Robert A, 1980. "Group Cost-of-Living Indexes," American Economic Review, American Economic Association, vol. 70(2), pages 273-78, May.
  2. 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.
  3. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
  4. Quah, Danny, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," CEPR Discussion Papers 1586, C.E.P.R. Discussion Papers.
  5. 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," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 33-76 National Bureau of Economic Research, Inc.
  6. 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, vol. 9(May).
  7. Stephen G. Cecchetti, 1996. "Measuring Short-Run Inflation for Central Bankers," NBER Working Papers 5786, National Bureau of Economic Research, Inc.
  8. Robert T. Michael, 1975. "Variation Across Household in the Rate of Inflation," NBER Working Papers 0074, National Bureau of Economic Research, Inc.
  9. 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.
  10. 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.
  11. 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.
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