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Inflation heterogeneity across households

Author

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  • Kiss, Regina
  • Strasser, Georg

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

Suggested Citation

  • Kiss, Regina & Strasser, Georg, 2024. "Inflation heterogeneity across households," Working Paper Series 2898, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20242898
    Note: 1137785
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    household heterogeneity; inequality; inflation; shopping behaviour; substitution;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D30 - Microeconomics - - Distribution - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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