Inflation, Inequality, and Social Conflict
Electronic Access:
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Summary:
This paper presents and then tests a political economy model to analyze the observed positive relationship between income inequality and inflation. The model's key features are unequal access to both inflation-hedging opportunities and the political process. The model predicts that inequality and 'elite bias' in the political system interact to create incentives for inflation. The paper's empirical section focuses on this predicted interaction effect. The identification strategy involves using the end of the Cold War as a source of exogenous variation in the political environment. It finds robust evidence in support of the model.
Series:
Working Paper No. 2006/158
Subject:
Income distribution Income inequality Inflation Personal income Political economy
English
Publication Date:
June 1, 2006
ISBN/ISSN:
9781451864182/1018-5941
Stock No:
WPIEA2006158
Pages:
37
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