When More Poor Means Less Poverty: On Income Inequality and Purchasing Power
Abstract
We show theoretically that the poor can benefit from price changes induced by higher income inequality. As the number of poor in a society increases, or when the income difference between rich and poor increases, the market for products aimed towards the poor grows and such products become more profitable. As a result, there are circumstances where an increase in poverty associates with higher purchasing power of the poor. Using cross-country data at two points in time on the price of rice and Big Mac hamburgers, we confirm the relationship between inequality and purchasing power of the poor, and show that it is robust to several control variables and also to a first-difference specification.Download Info
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 900.
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Length: 14 pages
Date of creation: 24 Jan 2012
Date of revision:
Handle: RePEc:hhs:iuiwop:0900
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For corrections or technical questions regarding this item, or to correct its listing, contact: (Elisabeth Gustafsson).
Related research
Keywords: Inequality; Poverty; Prices; Purchasing power;Other versions of this item:
- Bergh, Andreas & Nilsson, Therese, 2012. "When More Poor Means Less Poverty: On Income Inequality and Purchasing Power," Working Papers 2012:2, Lund University, Department of Economics.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
References
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