Inflation heterogeneity across households

Regina Kiss and Georg Strasser

No 2898, Working Paper Series from European Central Bank

Abstract: This paper studies the nature, evolution, and sources of inflation heterogeneity across households in France and Germany. Inflation differences are large and persistent. The two main sources of inflation heterogeneity are spatial differences in the prices paid for the same product and differences in the household-specific variety choice within a category. Income heterogeneity by itself is not a relevant determinant of inflation heterogeneity, but due to its correlation with household behaviour, a significant and timevarying inflation difference between income groups emerges. Substitution is strongly behaviour-driven and largely detached from the relative price. The dispersion of the household-level elasticity of substitution does not fully account for the heterogeneity of substitution behaviour. Substitution does not reduce the dispersion of inflation, confirming the central role of preference heterogeneity in inflation measurement. JEL Classification: D12, D30, E31, F45

Keywords: household heterogeneity; inequality; inflation; shopping behaviour; substitution (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-eec and nep-mon
Note: 1137785
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242898

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