View full metadata record

dc.titleLow Pass-Through from Inflation Expectations to Income Growth Expectations: Why People Dislike Inflation
dc.contributor.authorHajdini, Ina
dc.contributor.authorKnotek, Edward S
dc.contributor.authorLeer, John
dc.contributor.authorPedemonte, Mathieu
dc.contributor.authorRich, Robert
dc.contributor.authorSchoenle, Raphael
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageUnited States
dc.date.available2025-01-10T00:01:00
dc.date.issue2025-01-10T00:01:00
dc.description.abstractUsing 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.
dc.format.extent80
dc.identifier.doihttp://dx.doi.org/10.18235/0013365
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Low-Pass-Through-from-Inflation-Expectations-to-Income-Growth-Expectations-Why-People-Dislike-Inflation.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectInflation
dc.subjectInflation Targeting
dc.subjectWage
dc.subjectLabor Market
dc.subjectEconomy
dc.subjectRandomized Controlled Trial
dc.subjectLabor Force
dc.subjectWage Growth
dc.subjectSmall Business
dc.subject.jelcodeE31 - Price Level • Inflation • Deflation
dc.subject.jelcodeE24 - Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital • Aggregate Labor Productivity
dc.subject.jelcodeE71 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
dc.subject.jelcodeC83 - Survey Methods • Sampling Methods
dc.subject.keywordsInflation;Wage-price spiral;Expectations;randomized controlled trial
idb.identifier.pubnumberIDB-WP-01672
idb.operationRG-K1098
Return to Publication