The non-monotonic relationship between seigniorage and inequality

Joydeep Bhattacharya, Helle Bunzel and Joseph Haslag

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: We present an analysis of how political factors may come into play in the equilibrium determination of inflation. We employ a standard overlapping generations model with heterogenous young-age endowments, and a government that funds an exogenous spending via a combination of non-distortionary income taxes and the inflation tax. Agents have access to two stores of value: fiat money and an inflation-shielded, yet costly, asset. The model predicts that the relationship between elected reliance on the inflation tax (for revenue) and income inequality may be non-monotonic. We find robust empirical backing for this hypothesis from a cross-section of countries.

Date: 2005-05-01
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: The non-monotonic relationship between seigniorage and inequality (2005)
Journal Article: The non‐monotonic relationship between seigniorage and inequality (2005)
Working Paper: The non-monotonic relationship between seigniorage and inequality (2004)
Working Paper: The Non-Monotonic Relationship Between Seigniorage and Inequality (2003)
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