Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309192 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1672
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
Using a large, nationally representative survey of US consumers, we estimate a causal 20 percent pass-through from inflation expectations to income growth expectations for the average consumer, with considerable heterogeneity in pass-through associated with sociodemographic factors. The results also indicate that higher inflation expectations cause an increase in consumers' likelihood to search for higher-paying jobs but do not change the likelihood of asking for a raise, suggesting that consumers recognize significant wage rigidity with their current employer. In a calibrated search-and-matching model, we find that demand and supply shocks combined with incomplete pass-through produce a strong negative relationship between expected inflation and expected utility. Taken together, the survey results and model analysis provide a labor market account of why people dislike inflation.
Subjects: 
Inflation
Wage-price spiral
Expectations
Randomized controlled trial
JEL: 
E31
E24
E71
C83
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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