Unveiling the inflation-income inequality paradox: contrasts across advanced and developing economies

Nguyen Van Bon

Journal of Economic Studies, 2025, vol. 53, issue 1, 157-170

Abstract: PurposeBoth income inequality and inflation can lead to social instability. Does inflation impact income inequality differently between advanced and developing countries? This paper delves into this question by analyzing the effects of inflation on income inequality across a sample of 34 advanced countries and 44 developing nations from 2010 to 2023.Design/methodology/approachEmploying both the two-step system GMM estimator and PMG estimation, the study reveals intriguing insights.FindingsFirstly, while inflation exacerbates income inequality in advanced countries, it narrows the gap in developing nations. Secondly, economic growth mitigates income inequality in advanced nations but widens it in developing ones. However, infrastructure development increases income inequality in advanced countries but alleviates it in developing ones. Thirdly, trade openness correlates with reduced income inequality across both groups of countries.Originality/valueSo far, no existing studies empirically approve the opposite effects of inflation on income inequality between developing and advanced economies. The findings offer valuable policy insights for governments in advanced and developing nations in the fight against income inequality.

Keywords: Inflation; Income inequality; Advanced countries; Developing countries (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-08-2024-0530

DOI: 10.1108/JES-08-2024-0530

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