@misc{35976,
title = {Low Pass-Through from Inflation Expectations to Income Growth Expectations: Why People Dislike Inflation},
author = {Hajdini, Ina and Knotek, Edward S and Leer, John and Pedemonte, Mathieu and Rich, Robert and Schoenle, Raphael},
year = {2025},
doi = {10.18235/0013365},
abstract = {Using a large, nationally representative survey of US consumers, we estimate a causal 20 percent pass-through from inflation expectations to income growth expectations for the average consumer, with considerable heterogeneity in pass-through associated with sociodemographic factors. The results also indicate that higher inflation expectations cause an increase in consumers' likelihood to search for higher-paying jobs but do not change the likelihood of asking for a raise, suggesting that consumers recognize significant wage rigidity with their current employer. In a calibrated search-and-matching model, we find that demand and supply shocks combined with incomplete pass-through produce a strong negative relationship between expected inflation and expected utility. Taken together, the survey results and model analysis provide a labor market account of why people dislike inflation.},
url = {https://doi.org/10.18235/0013365}
}