Income Inequality: Does Inflation Matter?
IMF Working Papers, January 1, 1998
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- Income Inequality: Does Inflation Matter?
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Bibliographic details
- Authors: Aleš Bulíř
- Published: January 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451928549.001
Summary and core findings
- This paper contributes to the income inequality literature that is based on the traditional Kuznets model.
- Price stability, financial deepening, level of development, state employment, and fiscal redistribution are found to enhance income equality in a given country.
- While the effect of price stability is uniform for all levels of GDP per capita, the effect of financial deepening is found to increase with the level of development.
- Tight monetary policies do not seem to have any austere effects; low inflation reinforces, rather than counteracts, the income-equalizing effect of fiscal redistribution.
Policy implications and interpretation
- Maintain price stability to support income equality across all levels of GDP per capita.
- Promote financial deepening, noting that its income-equalizing benefits increase with a country's level of development.
- Fiscal redistribution is income-equalizing, and its effectiveness is reinforced by low inflation rather than undermined.
- Tight monetary policy need not be avoided on the grounds of alleged austere distributional consequences, given the findings reported.
Subject matter and keywords
- Subject: Income distribution, Income inequality, Inflation, National accounts, Personal income, Price stabilization, Prices
- Keywords: Africa, Asia and Pacific, Eastern Europe, GDP, high-inflation steady state, income, Income distribution, Income inequality, inflation, inflation sensitivity, inflation variable, Kuznets hypothesis, low inflation, low-inflation country, Personal income, Price stabilization, WP
Content in this bundle
- Income Inequality: Does Inflation Matter? - WP/98/7