JOURNAL ARTICLE
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Household Inflation Inequality in the United States and Europe
Credit and Capital Markets – Kredit und Kapital, Vol. 55 (2022), Iss. 3 : pp. 325–347
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Daniel Stempel, Ph.D., Heinrich Heine University Düsseldorf, Chair of Monetary Economics, Universitätsstr. 1, 40225 Düsseldorf.
References
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Hagemann, R. P. (1982): The variability of inflation rates across household types. Journal of Money, Credit and Banking, Vol. 14(4), 494–510.
Google Scholar -
Hobijn, B./Lagakos, D. (2005): Inflation inequality in the United States. Review of Income and Wealth, Vol. 51(4), 581–606.
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Hobijn, B./Mayer, K./Stennis, C./Topa, G. (2009): Household inequality experiences in the U.S.: A comprehensive approach. Federal Reserve Bank of San Francisco Working Paper Series 19.
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Jaravel, X. (2019): The unequal gains from product innovations: Evidence from the U.S. retail sector. The Quarterly Journal of Economics, Vol. 134(2), 715–783.
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Kaplan, G./Schulhofer-Wohl, S. (2017): Inflation at the household level. Journal of Monetary Economics, Vol. 91, 19–38.
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Michael, R. T. (1979): Variation across households in the rate of inflation. Journal of Money, Credit, and Banking, Vol. 11(1), 32–46.
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Portillo, R./Zanna, L.-F./O’Connell, S./Peck, R. (2016): Implications of food subsistence for monetary policy and inflation. IMF Working Paper 70.
Google Scholar -
Argente, D./Lee, M. (2021): Cost of living inequality during the great recession. Journal of the European Economic Association, Vol. 19(2), 913–952.
Google Scholar -
Brainard, L. (2022): Variation in the Inflation Experiences of Households. Speech at the Spring 2022 Institute Research Conference, Federal Reserve Bank of Minneapolis. Accessed online: 19/07/2022. https://www.federalreserve.gov/newsevents/speech/brainard20220405a.htm.
Google Scholar -
de Soyres, F./Santacreu, A. M./Young, N. (2022): Fiscal policy and excess inflation during Covid-19: a cross-country view. FEDS Notes. Washington: Board of Governors of the Federal Reserve System.
Google Scholar -
Eurostat (2022): HICP methodology. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=HICP_methodology [online; accessed 26-08-2022].
Google Scholar -
Gürer, E./Weichenrieder, A. (2020): Pro-rich inflation in Europe: Implications for the measurement of inequality. German Economic Review, Vol. 21(1), 107–138.
Google Scholar -
Hagemann, R. P. (1982): The variability of inflation rates across household types. Journal of Money, Credit and Banking, Vol. 14(4), 494–510.
Google Scholar -
Hobijn, B./Lagakos, D. (2005): Inflation inequality in the United States. Review of Income and Wealth, Vol. 51(4), 581–606.
Google Scholar -
Hobijn, B./Mayer, K./Stennis, C./Topa, G. (2009): Household inequality experiences in the U.S.: A comprehensive approach. Federal Reserve Bank of San Francisco Working Paper Series 19.
Google Scholar -
Jaravel, X. (2019): The unequal gains from product innovations: Evidence from the U.S. retail sector. The Quarterly Journal of Economics, Vol. 134(2), 715–783.
Google Scholar -
Kaplan, G./Schulhofer-Wohl, S. (2017): Inflation at the household level. Journal of Monetary Economics, Vol. 91, 19–38.
Google Scholar -
Michael, R. T. (1979): Variation across households in the rate of inflation. Journal of Money, Credit, and Banking, Vol. 11(1), 32–46.
Google Scholar -
Portillo, R./Zanna, L.-F./O’Connell, S./Peck, R. (2016): Implications of food subsistence for monetary policy and inflation. IMF Working Paper 70.
Google Scholar
Abstract
Inflation rates differ across households depending on their sociodemographic characteristics. This paper calculates the inflation rates experienced by income quintiles in the US, the EU, France, Germany, Italy, Spain, and the UK between 2001 and 2021. The results indicate substantial inflation inequality between quintiles. Households with lower income experienced higher inflation rates than households with higher income. The aggregated inflation differential between the lowest and the highest quintile is always positive, with values up to 8.56 percentage points. One reason for this inequality is differing consumption baskets of households: essential goods, which exhibited above-average inflation, are more prevalent in the consumption baskets of lower quintiles, while non-essentials, which exhibited below-average inflation, are more relevant for higher quintiles. Upon examining inflation inequality across quintiles between January and June 2022, a similar pattern emerged in Europe. In the US, however, higher income quintiles experienced higher inflation rates in each month of 2022.