Distribution of Household Sacrifice Ratio in Iran

The sacrifice ratio, a concept introduced by Ball (1994), measures the economic cost of reducing inflation. It represents the percentage of output lost for every one-percent decrease in the inflation rate. Inflation not only impacts production but also significantly shapes consumption patterns and spending distribution, particularly in societies with wide income disparities.This study examines the sacrifice ratio in Iran from 1984 to 2022. It focuses on the relationship between inflation and the share of per capita gross expenditures for each income decile. First, periods of inflation reduction were identified. Then, the sacrifice ratio for each period was calculated using Ball's technique.The results reveal an inverted U-shaped relationship between the sacrifice ratio and income deciles. For the first to seventh deciles, the sacrifice ratio is positive, indicating that disinflation reduces their share of per capita gross expenditures. Conversely, for the eighth to tenth deciles, the sacrifice ratio is negative, meaning their share of expenditures increases during disinflation periods.Notably, the fifth decile experiences the greatest decline in its expenditure share as a result of disinflation, while the tenth decile sees the largest increase. These findings underscore how disinflation policies can disproportionately affect different income groups, highlighting the importance of addressing income inequality in economic planning.