Regina Kiss
- 30 January 2024
- WORKING PAPER SERIES - No. 2898Details
- 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 Code
- D12 : Microeconomics→Household Behavior and Family Economics→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 - Network
- Price-setting Microdata Analysis Network (PRISMA)