Prati, Alberto;
(2023)
The Well-Being Cost of Inflation Inequalities.
The Review of Income and Wealth
10.1111/roiw.12631.
(In press).
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Abstract
In terms of well-being, how costly is inflation? To answer this question, empirical evaluations have typically studied average inflation rates at the national level, thus disregarding the role of inflation inequalities within a country. In this article, we relax the assumptions that heterogeneous consumers face homogeneous inflation rates, and study the correlation between price changes and self-reported satisfaction with living standards. We use newly available data from France and adopt two approaches. First, we focus on individually perceived inflation and use the internationally harmonized Opinion Price Index as a proxy for experienced inflation. Variations in perceived inflation help predict well-being differences among consumers, even when controlling for relevant sociodemographic factors, personality traits, and common method variance. We estimate their marginal impact to be higher than equivalent variations in nominal income. Second, we compare groups of consumers over time and find that changes in the price of a good disproportionately affect the relative well-being of those who consume it. The study shows that the well-being cost of the inflation crisis would be underestimated if looking at aggregate figures only.
| Type: | Article |
|---|---|
| Title: | The Well-Being Cost of Inflation Inequalities |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1111/roiw.12631 |
| Publisher version: | https://doi.org/10.1111/roiw.12631 |
| Language: | English |
| Additional information: | Copyright © 2023 The Author. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of International Association for Research in Income and Wealth. This is an open access article under the terms of the Creative Commons Attribution License, https://creativecommons.org/licenses/by/4.0/, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. |
| Keywords: | Heterogeneous inflation; inflation inequality; Opinion Price Index; perceived inflation; standard of living; subjective well-being |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of Arts and Humanities |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10177900 |
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