Whether Low-Income Households and Retirees Face Higher Inflation? Evidence from Latvia

Olegs Krasnopjorovs

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Abstract: Economy-wide inflation rate does not necessarily correspond to the inflation rate actually faced by any given household. This paper is the first one to assess different inflation experiences of various household types in Latvia. It finds that low-income households and retirees have faced consistently higher inflation rate by about 0.5 percentage points per annum over the last 20 years. This result is consistent with higher inflation perceptions among these population groups as recorded in consumer surveys. Higher inflation for low-income households and retirees reflects the lion's share of food, utility bills and healthcare services in their consumption basket, which are among those goods and services with the fastest increase in consumer prices. Inflation inequality was particularly large before the Global Financial Crisis (GFC) of 2008 and grew again at the beginning of the Covid-19 pandemics. It is expected that inflation inequality in Latvia might increase further in 2022. The results of this study could be used in welfare policy debates, particularly regarding the use of retiree-specific (rather than economy-wide) inflation rate for indexation of old-age pensions, as well as analysing unequal economic costs of the Covid-19 pandemics on different population groups.

Keywords: inflation inequality; inflation by population groups; inflation perceptions by population groups (search for similar items in EconPapers)
Date: 2022-05-13
New Economics Papers: this item is included in nep-age and nep-mon
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Published in New Challenges in Economic and Business Development – 2022: Responsible Growth, University of Latvia, May 2022, Riga, Latvia. pp.148-153

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