Do tariffs work? @PJTheEconomist and @levell_peter discuss the economic consequences of tariffs, why governments use them, and whether they actually achieve their intended goals. ➡️ Listen to the podcast here:

P.S for those of a technical bent – the paper also contains a discussion of substitution bias, cost of living indices with non-homotheticities and missing goods bias!

11/ A possible reason for this is that cheaper goods are associated with lower profit margins. This means there is less scope for retailers to absorb increases in costs through lower profits, rather than higher prices for consumers.

10/ Instead, we find – looking at fresh products – that the cheapest EU imports went up more in price. Equal cost shocks lead to higher price increases for products at the cheaper end.

9/ To see if cost shocks pass through to cheaper items more generally, we also looked at another shock from the recent past. Around the Brexit referendum, the pound fell sharply against the Euro. We’d expect this to affect the costs of cheap and expensive EU imports equally.

8/ Why might this be? One explanation is that cheaper varieties tend to be associated with lower profit margins giving less scope for suppliers to absorb rising energy prices and labour costs. This would be consistent with the evidence.

7/ If we split products into different 10 levels of “quality” (assuming cheaper products are not as nice as more expensive ones), we see that products in the bottom quality rung saw price increase of 36% compared to 16% for the top quality rung.

6/ In fact, differences in spending patterns within categories entirely explain why poorer households saw higher inflation rates than the rich. Lower income households tend to buy cheaper types of bread, pasta etc. and these rose more in price in general - “cheapflation”.

5/ It turns out that most of the differences in inflation rates across households is not because of differences across categories or types, rather it is because of differences in what exact products they buy *within* categories.

4/ What’s behind this difference? It could be because different households buy different categories of goods (e.g. soft drinks), different types of products (e.g. colas) or different items (e.g. a 500 ml bottle of some brand of cola).

3/ In a break with recent history, the cost of buying the typical grocery baskets of poorer (lower spending) households also rose by more than richer households. Households in the bottom quarter of spending saw inflation rates 5.6ppt higher than those in top quarter.

2/ We look at the period September 21 to September 23 using detailed data on grocery purchases. Relative to the past, grocery price inflation was very high. There were also large differences in the inflation different households experienced according to what they bought.

1/ Food and drink prices have risen by around a third since January 2021. That hit poorer households harder, because necessities take up more of their spending. But is that the end of the story? Our new paper has a detailed look.

Inequality: The IFS Deaton Review @TheIFS The whole evidence volume of the Review, with clickable links to the remarkable set of commissioned articles across the many dimensions of inequality, now published open access by OUP, follow the link at https://t.co/8yn3Hq3Fmf

Source: My own calculations from

A bit of fun with the CPI. Changes in the prices of different selected goods since 2005. Electronics and clothing 🔽. Energy and insurance🔼.

Now @EvanHD chairs a #RES2024 panel discussion with three @NuffieldFound grant holders @R_Blundell_UCL , @asvalero and @levell_peter exploring the causes of the UK's sluggish productivity performance.

It's been some time in the making, but here is the new @TheIFS A-level resource website. It's full of content to challenge students beyond the syllabus. Take your time to explore the resources and share it with fellow Economics teachers and students. https://t.co/DifiX5Ydfi

We talk to @Aitor_IrastFadr who, with @levell_peter & @matthiasparey at the @TheIFS, has used the ONS-LS to investigate how individuals and their partners responded to rising Chinese import competition in the 2000s. https://t.co/I2BfqxN6v5