The Well-Being Cost of Inflation Inequalities

The Review of Income and Wealth

Authors: Dr. Alberto Prati

Alberto Prati

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.

The study shows that the well-being cost of the inflation crisis would be underestimated if looking at aggregate figures only.

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