Heterogeneity in prices and inflation over the life cycle

Toshiaki Shoji ()
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Toshiaki Shoji: Seikei University

Empirical Economics, 2024, vol. 66, issue 2, No 6, 670 pages

Abstract: Abstract Using 1.7 million consumers’ purchasing records in Japan, this study constructs two types of price indexes at the consumer level. The first measures the relative price level of each consumer in a given time period (i.e., cross-sectional price-level comparison), while the other captures the change in prices between two different time periods for a given consumer (i.e., individual inflation rate). This study shows that these price indexes do not comove over the life cycle. In particular, older consumers who have retired pay higher prices for identical goods than working-age consumers, while facing the lower inflation rate. This difference in inflation rates stems from the fact that retired consumers tend to adjust their shopping baskets. Life-cycle variation in individual inflation rates is consistent with the argument that older consumers tend to increase the shopping frequency and search for low-priced goods.

Keywords: Inflation inequality; Price index; Shopping behavior; Heterogeneity (search for similar items in EconPapers)
JEL-codes: D12 E31 J11 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00181-023-02479-7

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