IDEAS home Printed from https://ideas.repec.org/a/wly/jmoncb/v53y2021i4p875-895.html
   My bibliography  Save this article

The Poor and the Rich: Preferences over Inflation and Unemployment

Author

Listed:
  • MARC HOFSTETTER
  • JOSÉ NICOLÁS ROSAS

Abstract

What are the tradeoffs that the public is willing to accept between inflation and unemployment? We find that people dislike extra points of unemployment more than extra points of inflation. This is true for both Europe and Latin America. For the latter, the aversion to unemployment relative to inflation is much greater. Moreover, in both regions, the poor's distaste for extra points of unemployment relative to inflation is significantly greater than that of the rich. This result contributes to the literature on the costs of inflation and questions the commonly held view that prescribes strong anti‐inflationary postures as a way to implement policies consistent with the preferences of the poor.

Suggested Citation

  • Marc Hofstetter & José Nicolás Rosas, 2021. "The Poor and the Rich: Preferences over Inflation and Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(4), pages 875-895, June.
  • Handle: RePEc:wly:jmoncb:v:53:y:2021:i:4:p:875-895
    DOI: 10.1111/jmcb.12783
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jmcb.12783
    Download Restriction: no

    File URL: https://libkey.io/10.1111/jmcb.12783?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 160-178, May.
    3. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
    4. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193, National Bureau of Economic Research, Inc.
    5. Justin Wolfers, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well‐Being," International Finance, Wiley Blackwell, vol. 6(1), pages 1-26, March.
    6. Cavallo, Alberto, 2013. "Online and official price indexes: Measuring Argentina's inflation," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 152-165.
    7. Betsey Stevenson & Justin Wolfers, 2008. "Happiness Inequality in the United States," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages 33-79, June.
    8. 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.
    9. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    10. De Roux, Nicolás & Hofstetter, Marc, 2014. "Do preferences shape institutions? The case of inflation aversion and inflation targeting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 68-78.
    11. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Ravallion, 2022. "Macroeconomic Covariates of Real Household Incomes in America," Working Papers gueconwpa~22-22-04, Georgetown University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Heinz Welsch & Jan Kühling, 2011. "Anti-Inflation Policy Benefits the Poor: Evidence from Subjective Well-Being Data," Working Papers V-343-11, University of Oldenburg, Department of Economics, revised Dec 2011.
    2. Nestor Gandelman & Ruben Hernandez-Murillo, 2009. "The impact of inflation and unemployment on subjective personal and country evaluations," Review, Federal Reserve Bank of St. Louis, vol. 91(May), pages 107-126.
    3. Heinz Welsch & Jan K¨¹hling, 2015. "Macroeconomic Preferences by Income and Education Level: Evidence from Subjective Well-Being Data," Review of Economics & Finance, Better Advances Press, Canada, vol. 5, pages 15-32, August.
    4. repec:zbw:hohpro:343 is not listed on IDEAS
    5. repec:old:wpaper:343 is not listed on IDEAS
    6. Alberto Prati, 2022. "The well-being cost of inflation inequalities," CEP Discussion Papers dp1870, Centre for Economic Performance, LSE.
    7. Ruprah, Inder J. & Luengas, Pavel, 2011. "Monetary policy and happiness: Preferences over inflation and unemployment in Latin America," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 59-66, February.
    8. Pavel Luengas & Inder J. Ruprah, 2009. "Should Central Banks Target Happiness? Evidence from Latin America," OVE Working Papers 0209, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    9. Heinz Welsch & Jan Kühling, 2016. "How Has The Crisis Of 2008–09 Affected Subjective Well-Being? Evidence From 25 Oecd Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 34-54, January.
    10. Ehrmann, Michael & Tzamourani, Panagiota, 2012. "Memories of high inflation," European Journal of Political Economy, Elsevier, vol. 28(2), pages 174-191.
    11. Antje Mertens & Miriam Beblo, 2016. "Self-Reported Satisfaction and the Economic Crisis of 2007–2010: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 125(2), pages 537-565, January.
    12. Berlemann, Michael, 2014. "Inflation aversion in transition countries: Empirical evidence from the Baltic States," Economic Systems, Elsevier, vol. 38(3), pages 415-432.
    13. Nicolás de Roux & Marc Hofstetter, 2011. "On the Endogeneity of Inflation Targeting: Preferences Over Inflation," Documentos CEDE 8731, Universidad de los Andes, Facultad de Economía, CEDE.
    14. Beja, Edsel, 2014. "Measuring economic ill-being: Evidence for the ‘Philippine Misery Index’," MPRA Paper 59772, University Library of Munich, Germany.
    15. Elissa Braunstein, 2013. "Central bank policy and gender," Chapters, in: Deborah M. Figart & Tonia L. Warnecke (ed.), Handbook of Research on Gender and Economic Life, chapter 21, pages 345-358, Edward Elgar Publishing.
    16. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.
    17. Santiago Lago-Peñas & Elena Rivo-López & Alberto Vaquero-García & Mónica Villanueva-Villar, 2018. "Do family firms contribute to job stability? Evidence from the great recession," Working Papers. Collection C: Family business 1801, Universidade de Vigo, GEN - Governance and Economics research Network.
    18. Helliwell, John & Huang, Haifang, 2011. "New measures of the costs of unemployment: Evidence from the subjective well-being of 2.3 million Americans," Working Papers 2011-3, University of Alberta, Department of Economics.
    19. Alpaslan Akay & Olivier Bargain & Klaus F. Zimmermann, 2017. "Home Sweet Home?: Macroeconomic Conditions in Home Countries and the Well-Being of Migrants," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 351-373.
    20. 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.
    21. Beja Jr, Edsel, 2010. "Is inflation targeting preferred by Filipinos?," MPRA Paper 24382, University Library of Munich, Germany.
    22. Mengyuan Sui & Haifeng Ding & Bo Xu & Mingxing Zhou, 2022. "The Impact of Internet Use on the Happiness of Chinese Civil Servants: A Mediation Analysis Based on Self-Rated Health," IJERPH, MDPI, vol. 19(20), pages 1-16, October.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jmoncb:v:53:y:2021:i:4:p:875-895. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.