Inflation by family group and consumption structure in Italy

Abstract

The calculation of inflation rates for specific groups in Italy, according to family typology and profession, on various time horizons between 1996 and 2004, does not find significant differences. This result, surprising in particular for the first two years of the euro circulation, when a vivid debite developed on consumer prices dynamics, can be explained by two factors. First, the interaction of the particular developments in relative prices with the consumption structure by type of family and expenditure chapter. There are in fact significant differences in the percentage composition of expenditure among the various typologies of Italian families and thus in the “weights” implicit in the inflation felt by the different groups, which depart considerably from the national average weights. The paper also notes that the confusion on these weights is among the main reasons for the persistent gap between inflation perceived by consumers and actual inflation; the analysis of the statistical foundations behind the official measurement of consumer prices enables to offer additional explanations for the gap. Secondly, only some of the family groups have been able to modify the structure of their expenditure to reduce inflation actually felt. Last few years have seen a change, in some cases very significant, in the relative position of the various groups, together with marked modifications in the composition of expenditure in real terms of the different groups of families, mainly just because of the variations in relative prices. A change which, in absence of any erosions in nationwide consumption, can help explaining the widespread perceptions of increasing poverty in the country.Distribution : Consumer Economics: Empirical Analysis : Inflation