Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt

Roel Beetsma and Frederick (Rick) van der Ploeg

No 741, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A democratic society in which the distribution of wealth is unequal elects political parties which tend to represent the interests of the poor. The clientele of such governments favour unanticipated inflation taxes to erode the real value of debt service and redistribute income from the rich to the poor. Consequently, inequality sows the seeds for inflation. Regressions confirm the empirical predictions of the model and show a strong positive relationship between the inflation rate and inequality, for a cross-section of democratic countries.

Keywords: Cross-Country Evidence; Discretion; Distribution; Government Debt; Inflation; Median Voter; Rules; Seigniorage; Taxation; Wealth (search for similar items in EconPapers)
JEL-codes: D3 E4 E6 H2 H3 (search for similar items in EconPapers)
Date: 1992-11
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Does Inequality Cause Inflation?: The Political Economy of Inflation, Taxation and Government Debt (1996)
Working Paper: Does Inequality Cause Inflation? The Political Economy of Inflation, Taxation and Government Debt (1992)
Working Paper: Does inequality cause inflation?: The political economy of inflation, taxation and government debt (1992)
Working Paper: Does inequality cause inflation?: The political economy of inflation, taxation and government debt (1992)
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