Inflation, Inequality, and Social Conflict

June 1, 2006

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Christopher W. Crowe "Inflation, Inequality, and Social Conflict", IMF Working Papers 2006, 158 (2006), accessed April 26, 2025, https://doi.org/10.5089/9781451864182.001

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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

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.

Subject: Income distribution, Income inequality, Inflation, Personal income, Political economy

Keywords: Mover accent, WP

Publication Details

Pages:

37
Volume:

2006
DOI:

https://doi.org/10.5089/9781451864182.001
Issue:

158
Series:

Working Paper No. 2006/158
Stock No:

WPIEA2006158
ISBN:

9781451864182
ISSN:

1018-5941

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