Nominal Devaluations, Inflation, and Inequality

Andrés Blanco, Andrés Drenik and Emilio Zaratiegui

American Economic Journal: Macroeconomics, 2025, vol. 17, issue 3, 270-310

Abstract: We study the distribution of labor income during large devaluations. Across countries, inequality falls after large devaluations within the context of a surge in inflation and a fall and subsequent recovery of real labor income. To better understand inequality dynamics, we use a novel administrative dataset covering the 2002 Argentinean devaluation. We show that following a homogeneous fall in real labor income across workers, the bottom of the income distribution recovers faster than the top. Low labor mobility and lack of union coverage among high-income workers explain their slow recovery.

JEL-codes: D31 E25 E31 F31 F44 O19 O24 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/mac.20230002

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