Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary

Sipiczki, Zoltán, Parádi Dolgos, Anett and Varga, József (2023) Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary. Acta Oeconomica, 73 (1). pp. 129-143. DOI

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Fluctuating prices can cause unintended redistribution of income and wealth, which may be particularly painful to lower income households. Our study examines the indirect effects of this redistribution in an empirical way: it focuses on the capital market distortions of inflation and the disparities in wealth and income. Consumer Price Index (CPI) measures average inflation. However, households feel different inflation rates because their expenditure patterns are different from the ‘average’ patterns. We used the Kruskal – Wallis H test to determine if there are statistically significant differences between low- and highincome households. We calculated alternative inflation rates based on income deciles’ different consumption basket. The study finds that households with low income often feel higher inflation than in the actual price indices published by the statistical offices. As our research shows, individuals in different wealth deciles perceive significantly different inflation. Our results also provide important information for economic policymakers, because if social groups perceive different inflation, it modifies the expected behaviour of the population, thereby weakening the economic policy effectiveness of different decisions.

Item Type:Article
Uncontrolled Keywords:inflation; redistribution; income inequality; Hungary
JEL classification:E03 - Behavioral Macroeconomics
O11 - Macroeconomic Analyses of Economic Development
Subjects:Economic development
ID Code:8278
Deposited By: Alexa Horváth
Deposited On:12 Jun 2023 12:24
Last Modified:12 Jun 2023 12:24

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