The Distributional Impact of Inflation in Pakistan: A Case Study of a New Price Focused Microsimulation Framework, PRICES
- University of Galway, Ireland
- CEQ Institute, Tulane University, United States
- Luxembourg Institute for Social and Economic Research, Luxembourg
Cite this article
as: C. O’Donoghue, B. Amjad, J. Linden, N. Lustig, D. M Sologon, Y. Wang, Z. Gizem Can; 2025; The Distributional Impact of Inflation in Pakistan: A Case Study of a New Price Focused Microsimulation Framework, PRICES; International Journal of Microsimulation; 18(3); 102-131.
doi: 10.34196/ijm.00327
Figures
Figure 1
Structure of a Price based Microsimulation Model.
Figure 2
Expenditure Category specific Price Growth November 2020-November 2022.
Source: Pakistan Bureau of Statistics Consumer Price Index. Ordered by COICOP category.
Tables
Table 1
Budget and Own Price Elasticities.
| Budget | Price | |
|---|---|---|
| Food and Non-alcoholic beverages | 0.760 | -0.626 |
| Alcoholic beverages* | . | . |
| Tobacco | 0.455 | -0.275 |
| Clothing and footwear | 0.718 | -0.469 |
| Domestic Energy | 0.165 | -0.099 |
| Electricity | 0.477 | -0.285 |
| Rents | 1.020 | -0.617 |
| Household services | 1.784 | -1.060 |
| Health | 0.833 | -0.514 |
| Private transport | 1.120 | -0.671 |
| Public transport | 1.071 | -0.650 |
| Communication | 0.845 | -0.512 |
| Recreation and culture | 0.284 | -0.171 |
| Education | 1.529 | -0.919 |
| Restaurants and hotels | 1.103 | -0.664 |
| Other goods and services | 1.068 | -0.694 |
| Childcare costs* | . | . |
| Motor fuels | 0.723 | -0.450 |
| Durables | 1.800 | -1.068 |
-
*
Alcoholic beverages and Childcare costs are not included in the Pakistan HBS.
Table 2
Drivers of Inflation by High Level Expenditure Groups.
| Budget Share | Average Inflation Rate (in %) | Contribution to total inflation (in %) | |
|---|---|---|---|
| Food | 0.417 | 42.89 | 17.89 |
| Motor Fuels | 0.047 | 79.27 | 3.74 |
| Domestic Energy and Electricity | 0.007 | 63.65 | 0.44 |
| Other Goods and Services | 0.529 | 36.61 | 19.36 |
| Total | 1.000 | 41.43 | 41.43 |
Table 3
Budget Shares of expenditure components across equivalised expenditure quintiles (as a share of total expenditure).
| Quintile | Food | Motor Fuels | Domestic Energy and Electricity | Other Goods and Services | Relative Expenditure |
|---|---|---|---|---|---|
| 1 | 0.511 | 0.031 | 0.008 | 0.450 | 0.42 |
| 2 | 0.487 | 0.041 | 0.007 | 0.464 | 0.62 |
| 3 | 0.467 | 0.043 | 0.007 | 0.483 | 0.82 |
| 4 | 0.444 | 0.049 | 0.007 | 0.500 | 1.11 |
| 5 | 0.342 | 0.053 | 0.006 | 0.599 | 2.03 |
| Average | 0.450 | 0.044 | 0.007 | 0.499 | 1.00 |
Table 4
Budget Shares before and after Inflation without behaviour.
| Quintile | Food | Motor Fuels | Domestic Energy and Electricity | Other Goods and Services | ||||
|---|---|---|---|---|---|---|---|---|
| Before | After | Before | After | Before | After | Before | After | |
| 1 | 0.511 | 0.524 | 0.031 | 0.027 | 0.008 | 0.007 | 0.45 | 0.442 |
| 2 | 0.487 | 0.499 | 0.041 | 0.036 | 0.007 | 0.006 | 0.464 | 0.459 |
| 3 | 0.467 | 0.476 | 0.043 | 0.038 | 0.007 | 0.006 | 0.483 | 0.481 |
| 4 | 0.444 | 0.450 | 0.049 | 0.043 | 0.007 | 0.006 | 0.5 | 0.501 |
| 5 | 0.342 | 0.331 | 0.053 | 0.046 | 0.006 | 0.005 | 0.599 | 0.618 |
| Average | 0.45 | 0.456 | 0.044 | 0.038 | 0.007 | 0.006 | 0.499 | 0.500 |
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Columns show the composition of the inflation (shown in the last column) in terms of the inflation in each expenditure category across equivalised expenditure quintiles
Table 5
Distributional impact of inflation across equivalised expenditure quintiles.
| Quintile | Food | Motor Fuels | Domestic Energy and Electricity | Other Goods and Services | Average |
|---|---|---|---|---|---|
| 1 | 0.215 | 0.025 | 0.005 | 0.163 | 0.408 |
| 2 | 0.206 | 0.033 | 0.005 | 0.165 | 0.409 |
| 3 | 0.198 | 0.034 | 0.004 | 0.170 | 0.407 |
| 4 | 0.190 | 0.039 | 0.004 | 0.178 | 0.412 |
| 5 | 0.149 | 0.042 | 0.004 | 0.226 | 0.422 |
| Average | 0.192 | 0.035 | 0.005 | 0.181 | 0.411 |
| Columns show the composition of the inflation (shown in the last column) in terms of the inflation in each expenditure category across equivalised expenditure quintiles. | |||||
Table 6
Welfare losses decomposition into price and behavioural adjustment.
| Equivalised Expenditure Quintile | Inflation | Relative CV | Behaviour |
|---|---|---|---|
| 1 | 0.4087 | 0.4053 | -0.0034 |
| 2 | 0.4105 | 0.4068 | -0.0037 |
| 3 | 0.4087 | 0.4060 | -0.0027 |
| 4 | 0.4131 | 0.4123 | -0.0009 |
| 5 | 0.4215 | 0.4197 | -0.0017 |
| Total | 0.4125 | 0.4100 | -0.0025 |
Table A2
Fuel Prices used in Analysis in Local Currency.
| Year | 2018 |
|---|---|
| Diesel per litre | 73.4 |
| Petrol per litre | 87.3 |
| Electricity per kwh | 10.4 |
| Kerosene per litre | 83.6 |
| LPG per litre | 50.2 |
| Coal per kg | 11.3 |
Data and code availability
The WIOD environmental accounts data is freely available can be downloaded from Economic, environmental and social effects of globalisation - European Commission (europa.eu) Household Budget survey data can be requested from the Pakistan Statistical office. Further information can be accessed on Data Dissemination | Pakistan Bureau of Statistics (pbs.gov.pk) The World Input Output Database (WIOD) data is freely available and downloadable from World Input-Output Database | WIOD | Groningen Growth and Development Centre | University of Groningen (rug.nl)
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