Inflation and Income Inequality : Is Food Inflation Different?

Author/Editor: James P Walsh ; Jiangyan Yu
Publication Date: June 01, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: There is an extensive literature noting that high inflation can add to income inequality, and a parallel literature assessing the effect of rising food prices on the poor. This paper attempts to combine these strands by dividing inflation into food and nonfood inflation and assessing whether food inflation affects income inequality differently from nonfood inflation. In an international sample and a sample of Chinese provinces, nonfood inflation exacerbates income inequality while the role of food inflation is more mixed. In a sample of Indian states broken down into urban and rural areas, we find that nonfood inflation adds to income inequality in both areas, while food inflation has a neutral to positive effect on income inequality in rural areas, providing support for the theory that rural wages may respond elastically to food prices.
Series: Working Paper No. 12/147
Subject(s): Agricultural commodities | Commodity prices | Income distribution | Producer prices

Author's Keyword(s): Inflation | core inflation | commodity prices | food prices | India | China | income distribution | income inequality
Publication Date: June 01, 2012
ISBN/ISSN: 9781475504163/1018-5941 Format: Paper
Stock No: WPIEA2012147 Pages: 22
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