Inflation and Household Welfare: Evidence from Bangladesh

Abstract

Inflation in Bangladesh is historically dominated by food inflation. Since food consumption constitutes a major part of the consumption basket of the people, inflation might have detrimental effect on household welfare. This chapter assesses the impact of inflation on different household groups such as day laborers and fixed-salaried households as well as other income groups. For this purpose, group-specific consumer price indexes (CPIs) have been estimated for different groups of households, using respective weights attached to their consumption baskets. Some stylized facts have emerged from the analysis. Relatively poorer households face higher inflation than non-poorer households and day  laborers, and fixed income household groups face higher food inflation than non-food inflation.

Appendix

1.1 Required sample size for wage rate survey

To decide about a nationally representative sample of wage workers, we apply the following formula:

$$ {N}_c={Z}^2\left[P\left(1-P\right)/{d}^2\right]\ast def $$

Here N_c represents the number of workers to be interviewed, and def represents design effect. For household survey, def is usually considered to be between 1.5 and 2. Here we assume it 1.5 and consider Z at 10% level of significance, precision d = 0.1 at 10% level. Here P is the proportion of households having specific type of workers (see Tables 2.6 and 2.7; Source: HIES 2010 and LFS 2010). Therefore, the required number of workers would be N = 193 from each division. As we have decided to conduct the survey in all seven divisions to make the sample representative, thus, a total of 1351 respondents (wage workers) were interviewed.

Table 2.6 Estimated sample size for different groups

Table 2.7 Sample size distribution across regions

Table 2.8 Definitions of different household groups

Table 2.9 Weights in food baskets