Inflation news and the poor: The role of ethnic heterogeneity

Frode Martin Nordvik

World Development, 2022, vol. 151, issue C

Abstract: Incomes are more unequally distributed in ethnically diverse populations than in more homogenous ones. In this paper, I help explain this pattern by showing that unanticipated inflation reduces the income share of the poor in ethnically fractionalized countries, while increasing it in ethnically homogenous populations. I propose a mechanism to explain the result, where inflation-hedging among the rich is more prevalent in ethnically fractionalized countries because inflation is more volatile. To identify episodes of unanticipated price increases, I construct a novel data set of inflation shocks across 189 countries, using the revisions to the inflation forecasts in IMFs World Economic outlook between spring and fall reports.

Keywords: Inflation; Income inequality; Ethnic diversity; Social insurance (search for similar items in EconPapers)
JEL-codes: D31 E31 O1 O15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:151:y:2022:i:c:s0305750x21003661

DOI: 10.1016/j.worlddev.2021.105751

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