Inflation and Income Inequality: Is Food Inflation Different?

June 1, 2012

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Format: Chicago

James P Walsh, and Jiangyan Yu. Inflation and Income Inequality: Is Food Inflation Different?, (USA: International Monetary Fund, 2012) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

There is an extensive literature noting that high inflation can add to income inequality, and a parallel literature assessing the effect of rising food prices on the poor. This paper attempts to combine these strands by dividing inflation into food and nonfood inflation and assessing whether food inflation affects income inequality differently from nonfood inflation. In an international sample and a sample of Chinese provinces, nonfood inflation exacerbates income inequality while the role of food inflation is more mixed. In a sample of Indian states broken down into urban and rural areas, we find that nonfood inflation adds to income inequality in both areas, while food inflation has a neutral to positive effect on income inequality in rural areas, providing support for the theory that rural wages may respond elastically to food prices.

Subject: Food prices, Income distribution, Income inequality, Inflation, National accounts, Personal income, Prices

Keywords: China, Commodity prices, Core inflation, Food inflation, Food prices, Global, Headline inflation, Income, Income distribution, Income inequality, Incomes of the poor, India, Inequality data, Inflation, Nonfood inflation, Per capita income, Personal income, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/147
Stock No:

WPIEA2012147
ISBN:

9781475504163
ISSN:

1018-5941

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