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Inflation, Inequality, and Social Conflict

Author/Editor: Crowe, Christopher W.
Authorized for Distribution: June 1, 2006
Electronic Access: Free Full Text (PDF file size is 613KB)
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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.
 
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Series: Working Paper No. 06/158
Subject(s): Inflation | Income distribution | Tax rates | Political economy
Author's keyword(s): Income inequality | inflation | political economy
 
English  
    Published:   June 1, 2006        
    ISBN/ISSN:   0 / 1934-7073   Format:   Paper
    Stock No:   WPIEA2006158   Pages:   37
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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