Accounting at the Macro Level: National Accounting, Inflation, and Rising Inequality
by Byung Hyun Ahn (UC Berkeley Haas), Scott Joslin (USC Marshall), and Yaniv Konchitchki (UC Berkeley Haas).
Paper's Summary:
Our work deals with two of today's grand challenges -- inflation and rising inequality. It adapts a traditional accounting measurement approach to the study of national accounting. Indeed, one of the building blocks of accounting information is the qualitative characteristic of faithful representation. Applying this concept at the national level, the measurement of inflation should represent what it purports to represent. However, this paper predicts and finds that unrecognized (i.e., omitted or ignored) heterogeneity in inflation effects on individuals across socioeconomic groups results in substantial economic consequences.
Overall, we document that inflation differentially impacting the consumption baskets of low- versus high-income households leads to future rising inequality in terms of real estate ownership, health insurance coverage, credit card debt, property crime, and educational attainment.