IDEAS home Printed from https://ideas.repec.org/a/prg/jnlpep/v2017y2017i6id630p633-645.html
   My bibliography  Save this article

Inflation and Income Inequality

Author

Listed:
  • Arkadiusz Sieron

Abstract

The aim of this paper is to examine the relationship between inflation and income inequality. The article is mainly theoretical, but considerations presented are illustrated by relevant empirical data. Based on our analysis, we claim that inflation, which accelerated after the collapse of the Bretton Woods system in 1971, could have contributed to the rise in income inequality in the USA since the 1970s. Our article transcends the simple notion of an inflation tax and focuses on other redistributive mechanisms of inflation (Cantillon effect) as one of the main causes of income inequality.

Suggested Citation

  • Arkadiusz Sieron, 2017. "Inflation and Income Inequality," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(6), pages 633-645.
    • Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:6:id:630:p:633-645
    DOI: 10.18267/j.pep.630
    as

    Download full text from publisher

    File URL: http://pep.vse.cz/doi/10.18267/j.pep.630.html
    Download Restriction: free of charge
    File URL: http://pep.vse.cz/doi/10.18267/j.pep.630.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.pep.630?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Christina D. Romer & David Romer, 1999. "Monetary policy and the well-being of the poor," Economic Review, Federal Reserve Bank of Kansas City, vol. 84(Q I), pages 21-49.
    2. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    3. D. E. W. Laidler & J. M. Parkin, 1977. "Inflation: A Survey," Palgrave Macmillan Books,, Palgrave Macmillan.
    4. Thomas I. Palley, 2013. "Financialization: What It Is and Why It Matters," Palgrave Macmillan Books, in: Financialization, chapter 2, pages 17-40, Palgrave Macmillan.
    5. Matthias Doepke & Martin Schneider, 2005. "Real effects of inflation through the redistribution of nominal wealth," Staff Report 355, Federal Reserve Bank of Minneapolis.
    6. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 160-178, May.
    7. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    8. Adam, Klaus & Tzamourani, Panagiota, 2016. "Distributional consequences of asset price inflation in the Euro Area," European Economic Review, Elsevier, vol. 89(C), pages 172-192.
    9. Virginia Maestri & Andrea Roventini, 2012. "Inequality and Macroeconomic Factors: A Time-Series Analysis for a Set of OECD Countries," Working Papers 34/2012, University of Verona, Department of Economics.
    10. Zsolt Darvas & Grégory Claeys & Thomas Walsh & Alvaro Leandro, 2015. "The effects of ultra-loose monetary policies on inequality," Policy Contributions 885, Bruegel.
    11. Ayako Saiki & Jon Frost, 2014. "Does unconventional monetary policy affect inequality? Evidence from Japan," Applied Economics, Taylor & Francis Journals, vol. 46(36), pages 4445-4454, December.
    12. Bank of England, Bank of England, 2012. "The distributional effects of asset purchases," Bank of England Quarterly Bulletin, Bank of England, vol. 52(3), pages 254-266.
    13. Coibion, Olivier & Gorodnichenko, Yuriy & Kueng, Lorenz & Silvia, John, 2017. "Innocent Bystanders? Monetary policy and inequality," Journal of Monetary Economics, Elsevier, vol. 88(C), pages 70-89.
    14. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May.
    15. Ayako Saiki & Jon Frost, 2014. "How does unconventional monetary policy affect inequality? Evidence from Japan," DNB Working Papers 423, Netherlands Central Bank, Research Department.
    16. Heer, Burkhard & Maußner, Alfred, 2012. "The Burden Of Unanticipated Inflation: Analysis Of An Overlapping-Generations Model With Progressive Income Taxation And Staggered Prices," Macroeconomic Dynamics, Cambridge University Press, vol. 16(2), pages 278-308, April.
    17. By Ales BulÌr, 2001. "Income Inequality: Does Inflation Matter?," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-5.
    18. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    19. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 67-150.
    20. Edward N. Wolff, 2012. "The Asset Price Meltdown and the Wealth of the Middle Class," NBER Working Papers 18559, National Bureau of Economic Research, Inc.
    21. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    22. Olivier Ledoit, 2011. "The redistributive effects of monetary policy," ECON - Working Papers 044, Department of Economics - University of Zurich.
    23. Hongyi Li & Heng-fu Zou, 2002. "Inflation, Growth, and Income Distribution: A Cross-Country Study," Annals of Economics and Finance, Society for AEF, vol. 3(1), pages 85-101, May.
    24. Arthur B. Kennickell, 2009. "Ponds and streams: wealth and income in the U.S., 1989 to 2007," Finance and Economics Discussion Series 2009-13, Board of Governors of the Federal Reserve System (U.S.).
    25. Hagemann, Robert P, 1982. "The Variability of Inflation Rates across Household Types," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 494-510, November.
    26. Pierre Monnin, 2014. "Inflation and Income Inequality in Developed Economies," Working Papers 1401, Council on Economic Policies.
    27. Casey B. Mulligan & Xavier Sala-i-Martin, 2000. "Extensive Margins and the Demand for Money at Low Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 961-991, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rajput, Sheraz Mustafa & Javaid, Muhammad Nadeem & Junaid, Ahmad, 2023. "Financial Development and Income Inequality: A U-shaped Relationship," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 30(2), July.
    2. Diana Barros & Aurora A. C. Teixeira, 2021. "Unlocking the black box: A comprehensive meta-analysis of the main determinants of within-region income inequality," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 55-93, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:prg:jnlpep:v:preprint:id:630:p:1-13 is not listed on IDEAS
    2. Davtyan, Karen, 2017. "The distributive effect of monetary policy: The top one percent makes the difference," Economic Modelling, Elsevier, vol. 65(C), pages 106-118.
    3. Kim, Dong-Hyeon & Lin, Shu-Chin, 2023. "Income inequality, inflation and financial development," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 468-487.
    4. Andrea Colciago & Anna Samarina & Jakob de Haan, 2019. "Central Bank Policies And Income And Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 33(4), pages 1199-1231, September.
    5. N'Yilimon Nantob, 2015. "Income Inequality and Inflation in Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2888-2902.
    6. Merrino, Serena, 2022. "Monetary policy and wage inequality in South Africa," Emerging Markets Review, Elsevier, vol. 53(C).
    7. Mehmet Balcilar & Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "The relationship between the inflation rate and inequality across U.S. states: a semiparametric approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(5), pages 2413-2425, September.
    8. Ha,Jongrim & Ivanova,Anna & Ohnsorge,Franziska Lieselotte & Unsal Portillo Ocando,Derya Filiz, 2019. "Inflation : Concepts, Evolution, and Correlates," Policy Research Working Paper Series 8738, The World Bank.
    9. Casiraghi, Marco & Gaiotti, Eugenio & Rodano, Lisa & Secchi, Alessandro, 2018. "A “reverse Robin Hood”? The distributional implications of non-standard monetary policy for Italian households," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 215-235.
    10. Kim, Hyoungjong & Rhee, Dong-Eun, 2022. "The effects of asset prices on income inequality: Redistribution policy does matter," Economic Modelling, Elsevier, vol. 113(C).
    11. Binder, Carola, 2019. "Inequality and the inflation tax," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    12. Pierre Monnin, 2014. "Inflation and Income Inequality in Developed Economies," Working Papers 1401, Council on Economic Policies.
    13. Mehdi El Herradi & Jakob Haan & Aurélien Leroy, 2023. "Inflation and the Income Share of the Rich: Evidence for 14 OECD Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(1), pages 170-194, March.
    14. Czeczeli, Vivien, 2021. "A monetáris politika hatása a jövedelmi egyenlőtlenségekre [Monetary-policy effects on income inequalities]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 282-299.
    15. Karen Davtyan, 2016. "“Income Inequality and Monetary Policy: An analysis on the Long Run Relation”," IREA Working Papers 201604, University of Barcelona, Research Institute of Applied Economics, revised Apr 2016.
    16. Kim, Dong-Hyeon & Lin, Shu-Chin, 2024. "Inflation and wealth inequality," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 893-907.
    17. Karen Davtyan, 2016. "“Income Inequality and Monetary Policy: An Analysis on the Long Run Relation”," AQR Working Papers 201604, University of Barcelona, Regional Quantitative Analysis Group, revised Apr 2016.
    18. Serena Merrino, 2021. "Wage inequality under inflationtargeting in South Africa," Working Papers 11018, South African Reserve Bank.
    19. Jérôme Creel & Mehdi El Herradi, 2024. "Income inequality and monetary policy in the euro area," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 332-355, January.
    20. Zhandos Ybrayev, 2022. "Distributional Consequences of Monetary Policy in Emerging Economies: Dollarization, Domestic Inflation, and Income Divergence," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 186-210, June.
    21. Anastasios Evgenidis & Apostolos Fasianos, 2021. "Unconventional Monetary Policy and Wealth Inequalities in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 115-175, February.

    More about this item

    Keywords

    Cantillon effect; income inequality; inflation; redistribution; wealth inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlpep:v:2017:y:2017:i:6:id:630:p:633-645. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.