the EU/EEA countries (about 1.6 percentage points) is slightly lower than for EMDE ECA countries.<sup>15</sup> The median COL-based inflation exceeds the median CPI-based inflation for all deciles or quintiles except the top ones (Figure A1 in the Appendix). The official CPI inflation exceeds COL inflation across all households in Greece, the Kyrgyz Republic, and Spain. The significant difference between the average COL- and CPI-based inflation appears to have emerged only around the middle of 2021; the median difference between both indicators was close to zero until that point <u>(Figure A2). This finding suggests that CPI-based inflation can underestimate COL</u> inflation when price increases are uneven across goods and services, as happened during the inflationary shock of 2022.<sup>16</sup> <u>Figure 9</u> shows the distribution of COL inflation rates by household size for 19 EMDE ECA countries. In Moldova, large households appear to face much lower levels of inflation compared to smaller households. This difference reaches 4 percentage points for single-member households.<sup>17</sup> Similar patterns are observed for many countries in the region, including Croatia, North Macedonia, and Serbia. On the other hand, the pattern reverses in Uzbekistan, where inflation is slightly higher for larger households than for smaller ones. These results indicate that although the relationship between inflation and household size is more heterogeneous across countries than across consumption deciles, for some countries, changes in inflation rates by household size should be considered when designing economic policies. The lower inflation rates experienced by larger households could be explained by economies of scale on household size that result in lower relative shares of some groups of products compared to these shares in the budgets of small-size households (e.g., <u>Deaton 1998). Typically, the largest economies of scale are on</u>

> 15 Our results – which show that poor households throughout Europe experience consistently higher inflation than the average households and that the gap between these households and the wealthiest households is even wider – are consistent with country-specific estimations for the same set of EU countries by <u>Claeys et al. (2023). In contrast, Jaravel (2022)</u> finds that post-pandemic inflation in the US was higher for the middle class (primarily because of inflation for gas and vehicles) than for the poor. Chakrabarti et al. (2023) report higher levels of inflation for middleincome households in the US at the end of 2021 and early 2022. However, by December 2022, the bottom 40 percent of the US population experienced the highest inflation of any income groups.

> 16 <u>World Bank (2022c)</u> finds that, before the energy and food price shock of the war in Ukraine, average household inflation was below CPI inflation in Bosnia and Herzegovina, Kosovo, Montenegro, and Serbia but above the CPI in Albania and North Macedonia.

> 17 <u>Fessler and Fritzer (2013)</u> report that one-person households in Austria in 2009/2010 experienced a 2.4 percentage point higher inflation rate than households with five or more members.

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