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Discussion Paper
Do People Care More About Inflation or Wage Growth?
Following the COVID-19 pandemic, consumer sentiment was low despite historically low unemployment and high wage growth. This same period coincided with inflation rates that were the highest in a generation.
Working Paper
Non-homothetic Demand Shifts and Inflation Inequality
This paper shows that adverse macroeconomic shocks systematically increase inflation for low-income households relative to high-income households. I document two key facts: (i) during every U.S. recession since 1959, aggregate spending shifts toward products disproportionately purchased by low-income households (necessities); and (ii) relative prices of necessities rise during recessions. These patterns can be explained by a model with non-homothetic demand and a concave production possibility frontier: shocks that reduce expenditure induce households to reallocate spending from luxuries to ...