Presented by Peter Levell, Institute for Fiscal Studies
The period 2021-2023 saw prices rising at historically high rates. Using household scanner data for fast-moving consumer goods, we show that this was accompanied by historically high rates of inflation inequality. We document systematic increases in the relative prices of cheaper product varieties (‘cheapflation’) over this period, and show that this drove differences in household-specific inflation rates. After accounting for substitution effects and adjusting for non-homothetic preferences, we show that the inflation-income gradient translated into a similar gradient in the cost of maintaining pre shock living standards.
Peter Levell is a member of the ESCoE Leadership Executive. He works on topics in the economics of labour and consumption, as well as the measurement and impact of inflation on different households. He is also a member of the ONS Technical Advisory Panel on Consumer Price Statistics.
Chair: Kevin Fox, UNSW & ESCoE
Discussant: Michael Hardie, Office for National Statistics