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The Poor and the Rich: Preferences Over Inflation and Unemployment

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Listed:
  • Marc Hofstetter
  • José Nicolás Rosas
Abstract
What are the tradeoffs that the public is willing to accept between inflation and unemployment? We find that people dislike unemployment more than inflation. This is true for both Europe and Latin America. For the latter, the aversion to unemployment relative to inflation is much greater. Moreover, in both regions, the poor’s distaste for unemployment relative to inflation is significantly greater than that of the rich. This result contributes to the literature on the costs of inflation and questions the commonly held view that prescribes strong anti-inflationary postures as a way to implement policies consistent with the preferences of the poor.

Suggested Citation

  • Marc Hofstetter & José Nicolás Rosas, 2018. "The Poor and the Rich: Preferences Over Inflation and Unemployment," Working papers 2, Red Investigadores de Economía.
    • Handle: RePEc:rie:riecdt:2
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    References listed on IDEAS

    as
    1. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
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    6. Jayadev, Arjun, 2006. "Differing preferences between anti-inflation and anti-unemployment policy among the rich and the poor," Economics Letters, Elsevier, vol. 91(1), pages 67-71, April.
    7. Betsey Stevenson & Justin Wolfers, 2008. "Happiness Inequality in the United States," The Journal of Legal Studies, University of Chicago Press, vol. 37(S2), pages 33-79, June.
    8. De Roux, Nicolás & Hofstetter, Marc, 2014. "Do preferences shape institutions? The case of inflation aversion and inflation targeting," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 68-78.
    9. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
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    Cited by:

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    3. Hassan Afrouzi & Alexander Dietrich & Kristian Myrseth & Romanos Priftis & Raphael Schoenle, 2024. "Inflation Preferences," NBER Working Papers 32379, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Monetary Policy; Central Banks; Inflation; Phillips Curve; Wellbeing; Income Distribution; Política monetaria; Bancos centrales; Inflación; Curva de Phillips; Bienestar; Distribución del ingreso;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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