Since Chinese exports are concentrated in low-quality non-durable products that are heavily purchased by poorer Americans, we find that about one third of the relative price drops faced by the poor are associated with rising Chinese imports.
Still, the Broda-Romalis paper does not directly address what has happened in the very recent past (say the last two and half years), as prices of goods imported from China have started to rise, and oil and food prices have risen relative to other prices. Some ideas can be gleaned from the data provided in Kokoski (2003), who provides 1987 expenditure shares for the various income quintiles. I present for illustration the distributions for the bottom first and top fifth quintiles.
Figure 1: 1987 expenditure shares for bottom income quintile, according to Consumer Expenditure Survey. Source: Kokoski (2003), Table 5.
Figure 2: 1987 expenditure shares for top income quintile, according to Consumer Expenditure Survey. Source: Kokoski (2003), Table 5.
With this information, one can make a back of the envelope calculation (and I stress this is only a back of the envelope calculation), based upon these shares and the indices reported for the components. This yields the following figure:
Figure 3: Year-on-year inflation calculated using annual CPI (not seasonally adjusted), (black), and guesstimated CPI for first quantile (blue) and fifth quantile (red). Inflation calculated as first log difference of annual CPI. Guesstimated CPIs calculated as geometric averages of component indices. Source: BLS, and author's calculations based on weights in Kokoski (2003), Table 5.
Here are several caveats. First, these are calculations that take into account differential expenditures at a very high level of aggregation, so they ignore differential shares at much finer levels of disaggregation. Second, relative prices may have moved even more dramatically in 2008, and the impact of that effect will be missed in this calculation. Third, these are a calculation based upon annual data; calculation of year to year changes will then allow for minimal influence of what has happened to food prices in the last half of 2007.
Those caveats in mind, these guesstimates imply that the differential between the actual CPI inflation and the inflation rate for the first quintile is only about 0.3 ppts in 2007.
A final caveat to keep in mind (from Kokoski (2003)):
...For most a priori definitions of demographic groups, there is generally more variation across households within each group than there is across groups. Since the statistical significance of any differences observed here between quintile indices is unknown, one should not draw quantitative conclusions from these results.
So one's experience should deviate from that represented by the CPI, even if one were at the 75 th quintile, exactly because of the highly individual nature of consumption bundles. But it is not clear that the income distributional aspects are driving people's differential experiences.
