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July 07, 2008
Different Inflation at Different Income Rates

Warren Meyer points out a post on the Q&O blog that shows something very interesting. It appears that the inflation rate for the bottom decile of incomes is significantly lower than the inflation rate faced by the top decile. This makes sense if one thinks about the mix of consumption of goods versus services as a percentage of income. At the top decile, the percentage of income spent on services is much higher and therefor much less tied to the deflationary pressures of globalization on manufactured goods and food.

When one takes those inflation differences into account it looks like the supposed increase in income inequality isn't there if the incomes are adjusted for the decile specific inflation rate.

Posted by hoffmang | July 07, 2008 10:50 AM


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