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Does inequality cause inflation? : The political economy of inflation, taxation and government debt

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Abstract

A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to the poor. Consequently, inequality sows the seeds for inflation. Regressions confirm the empirical predictions of the model and show a strong positive relationship between the inflation rate and inequality, for a cross-section of democratic countries.
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  • Beetsma, R.M.W.J. & van der Ploeg, F., 1992. "Does inequality cause inflation? : The political economy of inflation, taxation and government debt," Other publications TiSEM 158eb5da-80ec-434e-bfa2-f, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:158eb5da-80ec-434e-bfa2-f1e27be12726
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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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