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Price Shocks are Redistribution Shocks: Systemically Significant Prices for Inequality in the United States

Lara Jauregui, Jesus
Weber, Isabella Maria
Nassif Pires, Luiza
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Abstract
This paper develops a novel empirical framework to identify the sectors that are systemically significant for inequality in the United States. We incorporate decile-specific consumption baskets into an input-output price model to simulate how sectoral price shocks affect income distribution as measured by changes in the Gini coefficient. Using the pre-pandemic sectoral price volatility and the price changes from early 2022 as the price shocks for our simulations, we show that a small set of sectors in energy, food and agriculture, healthcare, chemicals and, to a lesser extent, wholesale trade and housing, have a disproportionate capacity to increase inequality when their prices rise. We find a substantial overlap between the sectors that are systemically significant for inflation and those that are significant for inequality. These findings underscore the limits and costs of conventional monetary policy in addressing supply-driven inflation and point to the need for sector-specific policies for price stabilization.
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Working Paper
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2025-11-03
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