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Inflation and Income Inequality: Is Food Inflation Different?

Author/Editor: Walsh, James P | Yu, Jiangyan
Authorized for Distribution: June 1, 2012
Electronic Access: Free Full Text (PDF file size is 1,071KB)
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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.
 
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Series: Working Paper No. 12/147
Subject(s): Agricultural commodities | Income distribution | China | India | Inflation | Producer prices | China, People's Republic of
Author's keyword(s): Inflation | core inflation | commodity prices | food prices | India | China | income distribution | income inequality
 
English  
    Published:   June 1, 2012        
            Format:   Paper
    Stock No:   WPIEA2012147   Pages:   21
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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