The Poor and the Rich: Preferences Over Inflation and Unemployment

32 Pages Posted: 5 Feb 2018

See all articles by Marc Hofstetter

Marc Hofstetter

Universidad de los Andes

José Rosas

Inter-American Development Bank (IDB)

Date Written: January 23, 2018

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.

Keywords: Monetary Policy, Central Banks, Inflation, Phillips Curve, Wellbeing, Income Distribution

JEL Classification: E24; E31; E52

Suggested Citation

Hofstetter, Marc and Rosas, José, The Poor and the Rich: Preferences Over Inflation and Unemployment (January 23, 2018). Documento CEDE No. 2018-05, Available at SSRN: https://ssrn.com/abstract=3116899 or http://dx.doi.org/10.2139/ssrn.3116899

Marc Hofstetter (Contact Author)

Universidad de los Andes ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

José Rosas

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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