The Impact of Inflation on Heterogeneous Groups of Households: an Application to Italy

This paper explores the determinants of the heterogeneity in the expenditure behaviors of the Italian households, using the Households Expenditure Survey provided by the Italian National Institute of Statistics (ISTAT) for the year 2005. We assume that differences among consumers are associated with differences in their economic and socio-demographic characteristics (such as gender, employment status and age of the householder, number of household components, presence of under 18 years old components), and we look for those characteristics that better differentiate groups of households according to their purchasing patterns. We apply a nonparametric discriminant analysis based on the various expenditure budget components, and detect the most discriminating partitions of families. The technique allows us also to identify the specific goods of consumption that significantly differ across the groups identified by the best partitions. We then study the different effects of the price dynamics on subgroups of households, and propose consumer price indices specific for the optimal households groups