Citation

Discussion Paper Details

Please find the details for DP741 in an easy to copy and paste format below:

Full Details

Title: Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt

Author(s): Roel Beetsma and Frederick van der Ploeg

Publication Date: November 1992

Keyword(s): Cross-Country Evidence, Discretion, Distribution, Government Debt, Inflation, Median Voter, Rules, Seigniorage, Taxation and Wealth

Programme Area(s): International Macroeconomics

Abstract: A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to the poor. Consequently, inequality sows the seeds for inflation. Regressions confirm the empirical predictions of the model and show a strong positive relationship between the inflation rate and inequality, for a cross-section of democratic countries.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=741

Bibliographic Reference

Beetsma, R and van der Ploeg, F. 1992. 'Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=741