Applied Micro Seminar : Every Tuesday
Time: 12:15 pm – 13:30 pm
Date: 18h of June
Room : 3001

Xavier Jaravel (LSE)  “Distributional Consumer Price Indices”

Abstract : This paper develops a new public database providing estimates of inflation heterogeneity across sociodemographic groups in the United States in real time. These distributional CPIs (D-CPIs) are fully consistent with the methodology of the official CPI and are available from 2002 to the present day. Using this data set, I establish three results showing that D-CPIs have important implications for the measurement of long-run trends in inequality and poverty, as well as of real wage dynamics during crises. First, I find that “real” income inequality across households between 2002 and 2019 has increased about 45% faster with D-CPIs, compared to the official CPI. While the income gap between the top and bottom income quintiles increased by 15.6% during this period according to the official CPI, it increased by 22.6% with D-CPIs. Second, I find that today
2.3 million people are below the “real” poverty line using D-CPIs but above the poverty threshold using the official CPI. This population should become eligible for poverty alleviation programs tied to the poverty line, such as Medicaid. Third, focusing on the inflation burst in the years following the Covid-19 pandemic, I find that inflation was higher for the middle class, compared to low-income and high-income households. This
pattern is driven by gas and vehicles and implies that the compression of “real” wages was about 25% faster with D-CPIs than with the official CPI. Given that D-CPIs are available in real time (each month) and follow data construction steps that are identical to the official CPI, they can be readily adopted by statistical agencies for the production of statistics on inequality and poverty, for example in the context of distributional national
accounts

Organizers:
Benoît SCHMUTZ (Pôle d’économie du CREST)
Clément MALGOUYRES (Pôle d’économie du CREST)
Sponsors:
CREST