Inflation Inequality

The conventional wisdom is that inflation always hits the poor the hardest. Writing over at VoxEU, Christian Broda of the University of Chicago disagrees and suggests that the larger inflation burden falls on the richest households:

Inflation differentials between the rich and poor dramatically change our view of the evolution of inequality in America. Inflation of the richest 10 percent of American households has been 6 percentage points higher than that of the poorest 10 percent over the period 1994 – 2005. This means that real inequality in America, if you measure it correctly, has been roughly unchanged. And the reason is just as dramatic as the result. Why has inflation for the poor been lower than that for the rich? In large part it is because of China and Wal-Mart!

Here is a non-gated link to his recent research paper on the topic.

One response to “Inflation Inequality

  1. Poor babies. The price of fois gras has risen 6% more than the price of cheetos. So see, if you calculate the income gap “correctly” it’s not as bad as it seems….oh, gee that sure is a relief. That 2006 census data had me worried for a minute but whew. No substantive policy issues to address here.

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