Does Inflation Vary across Income Groups? Evidence from an Emerging Market:??

2017-05-11
Akçelik, Fatih
Cömert, Hasan
Official inflation figures represent the inflation of a typical (representative) household in an economy. However, each household has own consumption behavior and pattern, which mostly depends on its income level. Relative price variability and the weight divergence of consumer items across households are more pronounced in the developing countries due to structural problems and income inequality. Therefore, exposed inflation is significantly different across households in the developing countries. As the first comprehensive study for developing countries, we analyze inflation differentials across income groups in Turkey by using Household Budget Survey (HBS) and consumer price data. We find that poor households are exposed to higher inflation than rich households on average in Turkey. More importantly, as income gap widens, inflation inequality across households increases. Inflation exposure differentials are highly volatile due to frequent supply shocks. While main upside contributors to inflation differentials are food items and tobacco products, main downside contributors are automobile, motor fuel products, restaurant and housework services. Moreover, we conclude that the inflation of poor households is more sensitive to food price shocks, while that of rich households is more sensitive to exchange rate and import price changes in Turkey.
Citation Formats
F. Akçelik and H. Cömert, “Does Inflation Vary across Income Groups? Evidence from an Emerging Market:??,” presented at the Salerno Universitesi Seminer Serisi (11 Mayıs 2017), 2017, Accessed: 00, 2021. [Online]. Available: https://hdl.handle.net/11511/72785.