On the Distributional Effects of the Current High Inflation Rates

At 4.5%, the inflation rate in Germany in October 2021 was the highest since the early 1990s. It is often argued that high price increases lead not only to a general loss of purchasing power but also to distribution effects, because lower income groups suffer most from rising food and energy prices. At least at present, such distribution effects do not result from different increases in the cost of living of individual income groups. Rather, since mid-2021 at the latest, the baskets of poorer households have become much more slowly expensive than those of richer households.