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Inflation and income inequality in a variety-expansion growth model with menu costs

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  • Zheng, Zhijie
  • Mishra, Tapas
  • Yang, Yibai

Abstract

This study explores the effect of inflation on income inequality in a growth model with variety expansion and menu costs. Inflation is found to determine income inequality via both asset-value and interest-rates effects. Our numerical analyses show that higher inflation turns these effects negative, stifling economic growth and mitigating income inequality.

Suggested Citation

  • Zheng, Zhijie & Mishra, Tapas & Yang, Yibai, 2020. "Inflation and income inequality in a variety-expansion growth model with menu costs," Economics Letters, Elsevier, vol. 194(C).
  • Handle: RePEc:eee:ecolet:v:194:y:2020:i:c:s0165176520302366
    DOI: 10.1016/j.econlet.2020.109373
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    References listed on IDEAS

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    11. Zheng, Zhijie, 2020. "Inflation and income inequality in a Schumpeterian economy with menu costs," Economics Letters, Elsevier, vol. 186(C).
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    Cited by:

    1. Chu, Angus C., 2020. "Inflation, Innovation and Growth: A Survey," MPRA Paper 103740, University Library of Munich, Germany.
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    More about this item

    Keywords

    Inflation; Income inequality; Menu costs; Variety expansion;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D30 - Microeconomics - - Distribution - - - General

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