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  1. Group Specific Inflation Rates for Austrian HouseholdsFriedrich Fritzer and Ernst GlatzerDisclaimer: Any views expressed are only the author’s opinions and should not be regarded as official views of the Oesterreichische Nationalbank10th meeting of the UN International Working Group on Price Indices (The Ottawa Group)Ottawa, 9th to 12th October 2007

  2. Outline • Inflation rates based on plutocratic weights versus inflation rates based on democratic weights • Data and conceptual issues • Household groups • Group specific inflation rates • Preliminary conclusions

  3. The plutocratic bias - weights • Plutocratic weights: Households weighted proportional to their total expenditures • Democratic weights Households weighted equally

  4. The plutocratic bias – a single scalar • Plutocratic bias is the difference between a CPI based on plutocratic weights and a CPI based on democratic weights • Where

  5. Components which contribute to the heterogeneity of inflation rates across households • First, a measure of inequality of household expenditures: • Second, a measure of the consumption pattern of consumers: • Third, the variation of expenditure elasticities with prices:

  6. Empirical estimates of the bias

  7. Group specific inflation rates: data • Price indexes are those constructed by the national statistical office with dis-aggregation going down to the COICOP 4-digit level. • In total there are 95 COICOP sub-classes • Weights for the household groups are based on the Austrian Consumer Expenditure Surveys 1999/2000 and 2004/2005. • 17 COICOP sub-classes were excluded due to considerable over- or underreporting in the consumer expenditure surveys.

  8. Group specific inflation rates: weights • Step 1: Preliminary weights: • Step 2: Correction of expenditures for household groups • With the correction factor: • Step 3: Final weights use corrected expenditures

  9. Criteria for grouping of households • (Equivalised) income: • low (1st to 3rd decile), • medium (4th to 7th decile), • high (8th to 10th decile). • Education (based on reference person): • low, i.e. compulsory school only, • medium, i.e. apprenticeship or high school, • high, i.e. university education. • Household composition • female single, male single, • lone parents, • two adult persons without children, • two or more adult persons with children and • three or more adult persons without children.

  10. Groups above headline inflation

  11. Groups broadly around headline inflation

  12. Groups below headline inflation

  13. Expenditures contributing to inflation for two adults without children

  14. Expenditures accounting for the higher inflation of female singles in the low as compared to the medium income range

  15. Preliminary conclusions • First, in most years the plutocratic bias was negative. Hence, households with lower total spending experienced a higher inflation rate than the ‘average’. From 2001 to 2006 the bias was on average about -0.1 percentage points annually. • Second, in general households with lower education and lower income face higher inflation rates. Additionally the HICP seems to be a fairly good measure of inflation for bigger household groups. • Third, from 1999 to 2006 the differential of group specific inflation to headline inflation seems to be fairly persistent. • Fourth, the inflation contribution of housing co-moved with group specific inflation rates.

  16. The End Thank you for your attention

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