Inflation and Income Inequality: A Shopping-Time Aproach

Ensaios Economicos No. 566

19 Pages Posted: 4 Feb 2014

See all articles by Rubens Penha Cysne

Rubens Penha Cysne

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Wilfredo Leiva Maldonado

Universidade Católica de Brasília

Paulo Klinger Monteiro

Getulio Vargas Foundation (FGV) - EPGE

Date Written: February 3, 2014

Abstract

Our work is based on a simplified heterogenous-agent shopping time economy in which economic agents present distinct productivities in the production of the consumption good, and differentiated access to transacting assets. The purpose of the model is to investigate whether, by focusing the analysis solely on endogenously determined shopping times, one can generate a positive correlation between inflation and income inequality. Our main result is to show that, provided the productivity of the interest-bearing asset in the transacting technology is high enough, it is true true that a positive link between inflation and income inequality is generated. Our next step is to show, through analysis of the steady-state equations, that our approach can be interpreted as a mirror image of the usual inflation-tax argument for income concentration. An example is offered to illustrate the mechanism.

Keywords: Inflation, Gini Coefficient, Income Inequality, Shopping Time, Income Distribution

JEL Classification: E40, D60

Suggested Citation

Cysne, Rubens Penha and Maldonado, Wilfredo Leiva and Monteiro, Paulo Klinger, Inflation and Income Inequality: A Shopping-Time Aproach (February 3, 2014). Ensaios Economicos No. 566, Available at SSRN: https://ssrn.com/abstract=2390025 or http://dx.doi.org/10.2139/ssrn.2390025

Rubens Penha Cysne (Contact Author)

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55-21-552-5099 (Phone)
+55-21-536-9409 (Fax)

Wilfredo Leiva Maldonado

Universidade Católica de Brasília ( email )

Brasília, DF
Brazil

Paulo Klinger Monteiro

Getulio Vargas Foundation (FGV) - EPGE ( email )

sala 1103
Rio de Janeiro RJ, 22250-900
Brazil
+55 21 37995838 (Phone)
+55 21 25538821 (Fax)

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