A recent report highlights that inflation rates over the past year have differed between states based on their political leanings. The findings show that liberal states and cities within those states have experienced higher inflation compared to conservative states.
The report explains that local economic conditions and policies can cause deviations from the national average inflation rate. It notes, "For example, if local housing supply is relatively inelastic, then monetary or fiscal expansions translate more into local price increases than into quantities increases, generating more inflation in housing rents than in otherwise similar locations with more elastic supply."
This pattern holds across various ways of measuring inflation and different methods of grouping states by political orientation. According to the report, these differences are consistent whether looking at broad measures or focusing on specific sectors like housing.
The study underscores how both state-level policies and market characteristics such as housing supply flexibility contribute to the observed differences in inflation rates between liberal and conservative areas.
