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Inflation and income inequality: does the level of income inequality matter?

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  • Edmond Berisha
  • Ram Sewak Dubey
  • Orkideh Gharehgozli

Abstract

Given the complexity of interaction between inflation and inequality, we examine whether the impact of inflation on inequality differs among distinct levels of income inequality across the US states. Results reveal that there is a negative contemporaneous effect of inflation on the inequality which becomes stronger with higher levels of income inequality. However, over a one year period, we find higher inflation rate to further increase income inequality only when income inequality is initially relatively low.

Suggested Citation

  • Edmond Berisha & Ram Sewak Dubey & Orkideh Gharehgozli, 2023. "Inflation and income inequality: does the level of income inequality matter?," Applied Economics, Taylor & Francis Journals, vol. 55(37), pages 4319-4330, August.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:37:p:4319-4330
    DOI: 10.1080/00036846.2022.2128293
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    Cited by:

    1. Agba, Komlan Eli, 2025. "Non-linear dynamics of inflation aversion in the Euro Area: Evidence from a Panel Smooth Transition model," Economic Modelling, Elsevier, vol. 153(C).
    2. Swapnanil SenGupta & Aakansha Atal, 2024. "Income inequality in the face of climate change: an empirical investigation on unequal nations, vulnerable regions and India," SN Business & Economics, Springer, vol. 4(8), pages 1-33, August.
    3. Tiberto, Bruno Pires, 2025. "How does central bank independence influence the relationship between inflation, income inequality and poverty?," Journal of International Money and Finance, Elsevier, vol. 159(C).
    4. Mihai Mutascu & Albert Lessoua & Nicolae Bogdan Ianc, 2025. "The impact of inflation on inequality in the CEMAC and UEMOA zones of Sub‐Saharan Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1893-1914, April.
    5. Ayoub Rabhi & Brandon Parsons, 2024. "How is Central Bank Independence Shaping Income Inequality in Developing Countries?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(2), pages 159-176, May.
    6. Coccia, Samantha & Russo, Alberto, 2025. "Inflation, inequality and financial vulnerability: Monetary vs. fiscal policy in the face of an energy shock," Energy Economics, Elsevier, vol. 143(C).
    7. Abdurhman Kedir Ali & Dagmawe Menelek Asfaw, 2023. "Nexus between inflation, income inequality, and economic growth in Ethiopia," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-20, November.

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