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Who pays the price when prices rise?

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We employ microdata from Statistics Austria’s 2019/2020 Austrian household budget survey (“Konsumerhebung”) and match them with price data from 2020 onward to estimate household- level inflation rates for a representative sample of households in Austria. We focus on three questions: (1) Which households are confronted with the highest inflation rates? (2) Which households are most likely to experience financial distress due to inflation? (3) Which easily observable socioeconomic characteristics convey the most information about inflation exposure since 2020? We find heterogeneity of inflation between households to be large compared to changes in aggregate (weighted average) inflation over time. Whether households live in urban areas or in the country and whether they rent or own their homes, i.e. municipality size and tenure status, are important predictors of inflation heterogeneity given their strong link to energy prices. Our findings question policymakers’ exclusive focus on the (harmonized) consumer price index based on a mean consumption bundle in times of diverging price developments, and we advocate monitoring inflation on the basis of a broader range of real household- level consumption bundles. We find that most households have the financial means to afford the overall increase in the price level. The group of households who struggle consists largely of households whose financial situation is also difficult in times of low inflation: the unemployed, the (working) poor and single parents. Consequently, policies aimed at mitigating the impact of inflation should rely on measures of financial distress. Also, stopping subsidizing urban sprawl, preventing further sprawl, and even reversing sprawl is key to making households more resilient to higher and/or more volatile energy prices in the future.

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  • Pirmin Fessler & Friedrich Fritzer & Mirjam Salish, 2023. "Who pays the price when prices rise?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/22-Q1/, pages 67-84.
    • Handle: RePEc:onb:oenbmp:y:2023:i:q4/22-q1/23:b:5
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation; household-specific inflation; microdata;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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