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The Poor and the Rich: Preferences Over Inflation and Unemployment

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  • 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 unemployment more than 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 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, 2018. "The Poor and the Rich: Preferences Over Inflation and Unemployment," Working papers 2, Red Investigadores de Economía.
  • Handle: RePEc:rie:riecdt:2
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary Policy; Central Banks; Inflation; Phillips Curve; Wellbeing; Income Distribution; Política monetaria; Bancos centrales; Inflación; Curva de Phillips; Bienestar; Distribución del ingreso;
    All these keywords.

    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

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