Journal
JOURNAL OF MONETARY ECONOMICS
Volume 54, Issue 4, Pages 1088-1114Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jmoneco.2006.02.009
Keywords
inflation; inequality; distributional conflict; fiscal policy; bargaining
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Cross-country evidence on inflation and income inequality suggests that they are positively related. This article explores the hypothesis that this correlation is the outcome of a distributional conflict underlying the determination of government policies. A political economy model is presented in which equilibrium inflation is positively related to the degree of inequality in income due to the relative vulnerability to inflation of low income households. (C) 2006 Elsevier B.V. All rights reserved.
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