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Inflation-Inequality Puzzle: Is it Still Apparent?

Author

Listed:
  • Edmond Berisha

    (Feliciano School of Business, Montclair State University, Montclair, NJ 07043)

  • Orkideh Gharehgozli

    (Feliciano School of Business, Montclair State University, Montclair, NJ 07043)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

US economy is facing inflation jump, which is running at 30 year high. Using inequality and inflation data that are available at a high frequency, i.e. on a quarterly basis for over 30 years, we find evidence that inflation causes swings in income distribution rapidly. The dynamic response of inequality to changes in inflation alters over a fourquarter period. We show that the contemporaneous impact of inflation on inequality is negative; however, after three quarters the impact becomes positive and stronger in magnitude. From our results we learn that over a one year period, higher inflation would exacerbate income inequality in USA. The positive impact of inflation on income inequality is stronger when inflation rate, initially, is above the sample average.

Suggested Citation

  • Edmond Berisha & Orkideh Gharehgozli & Rangan Gupta, 2022. "Inflation-Inequality Puzzle: Is it Still Apparent?," Working Papers 202206, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202206
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation; Inequality; United States;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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