Inflation and Income Inequality: Is Food Inflation Different?

23 Pages Posted: 9 Aug 2012

See all articles by James P. Walsh

James P. Walsh

International Monetary Fund (IMF)

Jiangyan Yu

International Monetary Fund (IMF)

Date Written: June 2012

Abstract

There is an extensive literature noting that high inflation can add to income inequality, and a parallel literature assessing the effect of rising food prices on the poor. This paper attempts to combine these strands by dividing inflation into food and nonfood inflation and assessing whether food inflation affects income inequality differently from nonfood inflation. In an international sample and a sample of Chinese provinces, nonfood inflation exacerbates income inequality while the role of food inflation is more mixed. In a sample of Indian states broken down into urban and rural areas, we find that nonfood inflation adds to income inequality in both areas, while food inflation has a neutral to positive effect on income inequality in rural areas, providing support for the theory that rural wages may respond elastically to food prices.

Keywords: Core Inflation, Commodity Prices, Food Prices, Income Distribution, Income Inequality, Agricultural Commodities, Producer Prices

JEL Classification: E31, D31, R00

Suggested Citation

Walsh, James P. and Yu, Jiangyan, Inflation and Income Inequality: Is Food Inflation Different? (June 2012). IMF Working Paper No. 12/147. Available at SSRN: https://ssrn.com/abstract=2127039

James P. Walsh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jiangyan Yu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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