Xavir Jaravel (2017): Product innovations and inflation i...

Xavir Jaravel (2017): Product innovations and inflation in the U.S. retail sector have magnified inequality: "shifts in income distribution in the United States lead to product innovations that target high-income households, which increases purchasing-power inequality...

...Such product innovations have both a direct effect on purchasing power across income groups because they target specific groups, as well as an indirect effect through competition with products already in the marketplace. In short, wealthier households are more likely to spend on product categories where product innovations are more common and where competition is increasing, while low- and middle-income households are more likely to purchase products that face less competitive pricing pressures in the marketplace. For economic policymakers, this dynamic has important implications for the price indexation of government programs that provide support for low- and middle-income families...

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