The Inflation-Inequality Connection in the European Union: U-Turn to Equity?

Mahmut Zeki Akarsu () and Orkideh Gharehgozli ()
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Mahmut Zeki Akarsu: University of Warsaw, Warsaw, Poland, Postal: Candidate, Faculty of Economic Sciences, University of Warsaw, Długa 44/50, 00-241 Warsaw, Poland.
Orkideh Gharehgozli: 2Montclair State University, Montclair, USA, Postal: Feliciano School of Business, Montclair State University, 1 Normal Avenue, Montclair, NJ 07043,, USA.

Journal of Economic Integration, 2024, vol. 39, issue 2, 296-318

Abstract: In this study, we delve into the complex relationship between inflation and inequality in the European Union from 1990 to 2019. Specifically, we explore the non-linear nature of this relationship, uncover turning points, and reveal the distinctive U-shape of the relationship between the two indicators. Our research also uncovers some striking findings: first, we discover that sales taxes disproportionately harm households and drive up inequality, and second, we find that income tax policies are very effective at reducing inequality in Western European countries, while they are substantially less effective in Eastern European countries with lower income tax rates.

Keywords: inflation; inequality; European Union (search for similar items in EconPapers)
JEL-codes: D60 O40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0902

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