hero working papers

Inflation and Inequality

Number: 199
Year: 2001
Author(s): Stefania Albanesi (Università Bocconi, IGIER)

Cross-country evidence on inflation and income inequality suggests that they are positively related. I explore the hypothesis that this correlation is the outcome of a distributional conflict underlying the determination of fiscal policy. I study a bargaining model of the political system in which inflation and inequality are positively correlated due to the relative vulnerability to inflation of low income households.