Pro-rich inflation in Europe: Implications for the measurement of inequality

Eren Gürer and Alfons Weichenrieder

No 209, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper studies the distributional consequences of a systematic variation in expenditure shares and prices. Using European Union Household Budget Surveys and Harmonized Index of Consumer Prices data, we construct household-specific price indices and reveal the existence of a pro-rich inflation in Europe. Particularly, over the period 2001-15, the consumption bundles of the poorest deciles in 25 European countries have, on average, become 10.5 percentage points more expensive than those of the richest decile. We find that ignoring the differential inflation across the distribution underestimates the change in the Gini (based on consumption expenditure) by up to 0.03 points. Cross-country heterogeneity in this change is large enough to alter the inequality ranking of numerous countries. The average inflation effect we detect is almost as large as the change in the standard Gini measure over the period of interest.

Keywords: inequality; Gini; EU countries; income dependent inflation (search for similar items in EconPapers)
JEL-codes: D31 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eur
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Pro-rich inflation in Europe: Implications for the measurement of inequality (2020)
Working Paper: Pro-rich Inflation in Europe: Implications for the Measurement of Inequality (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:209

DOI: 10.2139/ssrn.3183723

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