Inflation and income inequality: does the level of income inequality matter?

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Abstract

Given the complexity of interaction between inflation and inequality, we examine whether the impact of inflation on inequality differs among distinct levels of income inequality across the US states. Results reveal that there is a negative contemporaneous effect of inflation on the inequality which becomes stronger with higher levels of income inequality. However, over a one year period, we find higher inflation rate to further increase income inequality only when income inequality is initially relatively low.

Original languageEnglish
JournalApplied Economics
DOIs
StateAccepted/In press - 2022

Keywords

  • E52
  • Heterogeneity
  • I31
  • income inequality
  • unexpected inflation

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