Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297338 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2898
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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 time-varying 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.
Subjects: 
inflation
household heterogeneity
shopping behaviour
substitution
inequality
JEL: 
D12
D30
E31
F45
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6378-7
Document Type: 
Working Paper

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