Inflation Inequality and Household Response Effect: Evidence from Iran

Document Type : Research Paper


1 Ph.D. Student, Faculty of Economics, University of Tehran

2 Associate Professor, Faculty of Economics, University of Tehran

3 Assistant Professor, Faculty of Economics, Sharif University of Technology

4 Assistant Professor, University


In this paper, I study the inflation inequality across different income deciles of the Iranian economy for the years 1374-1398. The results show that the different pattern of household purchases in different income deciles and the difference in their response to inflation is an important factor in creating inflation inequality. The heterogeneity in household purchases causes the rate of inflation inequality between the rich and the poor to increase by 12 percent per unit of average inflation.
High-income households by changing their consumption baskets are able to reduce the adverse effects of inflation by 5%. On the other hand, low-income families face higher inflation rates by up to 4% because of an increase in their consumption of essential goods. As a result, for every unit of average inflation increase, the rate of inflation inequality felt by households increases by up to 20% compared to the previous case. In other words, the response of households to inflation causes a 66% increase in inflation inequality per unit of average inflation.
Also, the evidence suggests that the difference in the inflation across provinces causes, firstly, the rate of inflation inequality per unit increase in average inflation to increase significantly compared to the case where provincial heterogeneity was not considered; Second, inflation inequality is observed within each decile.
JEL Classification: E31, E52, D31, D33, D12, D63
Keyword: Inflation, Inflation Inequality, Regional Inflation Inequality


بانک مرکزی جمهوری اسلامی ایران ((1380-1397. شاخص بهای کالاها و خدمات مصرفی.
مرکز آمار جمهوری اسلامی ایران(1374 -1396) . داده‌های خام بودجه خانوار، کل،
مرکز آمار جمهوری اسلامی ایران (1374-1398). شاخص قیمت مصرف‌کننده خانوارهای روستایی.
مرکز آمار جمهوری اسلامی ایران(1380-1398) . شاخص قیمت مصرف کننده خانوارهای شهری.
مرکز آمار جمهوری اسلامی ایران(1381-1398) . شاخص قیمت مصرف کننده خانوارهای شهری.
کفایی، محمدعلی و مرادبیگی، مریم (1389). نابرابری تورمی در ایران به تفکیک استانی. اقتصاد و الگو سازی، 1(2)، 31-51
کمیجانی، اکبر و غیاثوند، ابوالفضل (1388). بررسی شکاف تورمی میان خانوارهای مناطق شهری ایران. تحقیقات اقتصادی, 44(87), 165-191.
Ruiz-Castillo, J., Ley, E., & Izquierdo, M. (2000). The Plutocratic Bias in the CPI: Evidence from Spain, IMF Working Papers, 2000(167), A001. Retrieved Jan 6, 2022
Christian Broda, John Romalis. (2009). The Welfare Implications of Rising Price Dispersion.
Crawford, I., & Oldfield, Z. (2002). Distribution aspects of inflation. Institute for Fiscal Studies .
Argente, D., Lee, M., & Moreira, S. (2018). Innovation and product reallocation in the great recession. Journal of Monetary Economics, 93, 1-20.
(1857). Die Produktions- und Ernteerträge und der Getreidehandel im preussischen Staate. Zeitschrift des Königlichen preussischen statischen Bureaus, 249.
Kaplan, G., & Schulhofer‐Wohl, S. (2017). Understanding the long‐run decline in interstate migration. International Economic Review, 58(1), 57-94.
Hobijn, B., & Lagakos, D. (2005). Inflation inequality in the United States. review of income and Wealth51(4), 581-606.
Izquierdo, M., Ley, E., & Ruiz-Castillo, J. (2003). The plutocratic gap in the CPI: evidence from Spain. IMF Staff Papers50(1), 136-155.
Michael, R. T. (1975). Variation Across Household in the Rate of Inflation(No. w0074). National Bureau of Economic Research.
Oosthuizen, M. (2007). Consumer Price inflation across the income distribution in South Africa.
Hait, P., & Jansky, P. (2014). Inflation differentials among Czech households. CERGE-EI Working Paper Series, (508).
Pollak, R. A. (1981). The social cost of living index. Journal of Public Economics15(3), 311-336.
Prais, S. (1958). Whose Cost of Living? Review of Economic studies,26, 126-134.
Sugema, I., Irfany, M. I., Holis, A., & Bakhtiar, T. (2010). Consumer price index for the poor (cpi-p): An empirical analysis of indonesia. International Research Journal of Finance and Economics58, 58-64.
  • Receive Date: 23 December 2020
  • Revise Date: 21 June 2021
  • Accept Date: 03 July 2021
  • First Publish Date: 03 July 2021