The differential rate of inflation between the poor and the rich following the introduction of the euro
Authors: G. Hardouvelis, O. Kosma, E. Simintzi
Publication: Economy & Markets, Eurobank Research, Issue 3, Volume 3, April 2007
- We utilize the Greek Statistical Agency’s Household Budget Survey on 6.5 thousand households in 2004/2005 to construct separate inflation indices for the poor (21.7% of the sample, with income below 60% of median income) and rich (29.5% of the sample with income above 140% of median income).
- Over the period 1990-2007, there is no difference in the average inflation the two groups face, although after 1/1/2001, in 54 months the poor faced a higher inflation than the rich, whereas in only 19 months the rich faced a higher inflation than the poor.
- Since the introduction of the euro in 1/1/2001, the poor face greater inflation uncertainty than the rich and this may explain their discontent with the euro.
- The divergence in the uncertainty of inflation between the rich and the poor grows larger when comparing the more extreme tails of the income distribution, the poorest 10% and the richest 10%.