Does inflation matter? The influence of perceived price changes on well-being

Łukasz Below

No 2023-086, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: I confirm the foregoing state of the art for inflation and well-being correlation while filling the gap in the literature and estimating the effects of individuals' inflation perception on well-being. I also discover the significant heterogeneity in attitudes toward inflation, inflation perception, and unemployment among European countries. Inflation measured by official statistics, as well as inflation perceived by consumers, has a significant negative influence on people's well-being. The relation was confirmed by regressing reported life satisfaction on a wide set of individual characteristics, as well as macroeconomic variables. While the inflation perception influence on well-being in Eastern Europe is higher than the influence of HICP, for Western Europe, it is the opposite. Both country groups also differ in terms of the marginal rate of substitution between inflation and unemployment – the effects of higher unemployment are more severe in comparison to the influence of inflation in Western Europe.

Keywords: inflation; happiness; unemployment; well-being (search for similar items in EconPapers)
JEL-codes: D60 E31 E5 E7 I31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-03
New Economics Papers: this item is included in nep-eec, nep-hap, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2023086

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