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The mediating contribution of institutional quality to the inflation - income inequality relationship in advanced countries

Author

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  • Van Bon Nguyen

    (Faculty of Finance, Ho Chi Minh University of Banking (HUB), Ho Chi Minh City, Vietnam)

Abstract

Both income inequality and inflation are potential sources of social instability, and the existing literature highlights a link between them. Does institutional quality contribute to shaping this relationship? This study examines how inflation, institutional quality, and their interaction influence income inequality in a panel of 34 advanced economies over the 2008-2023 period, employing both one-step and two-step system GMM estimators. The findings reveal that while inflation and institutional quality exacerbate income inequality, their interaction has a mitigating effect. In addition, trade openness and economic growth reduce income inequality, whereas infrastructure increases it. These results offer crucial insights, suggesting that enhancing institutional quality can help advanced economies manage inflation more effectively and narrow income inequality.

Suggested Citation

  • Van Bon Nguyen, 2026. "The mediating contribution of institutional quality to the inflation - income inequality relationship in advanced countries," Economic Research Guardian, Mutascu Publishing, vol. 16(1), pages 185-201, June.
    • Handle: RePEc:wei:journl:v:16:y:2026:i:1:p:185-201
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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