Inflation and Income Inequality in a Variety-Expansion Growth Model With Menu Costs

18 Pages Posted: 16 Jul 2020

See all articles by Zhijie Zheng

Zhijie Zheng

Southwestern University of Finance and Economics (SWUFE)

Tapas Mishra

Southampton Business School, University of Southampton

Yibai Yang

University of Macau

Date Written: June 23, 2020

Abstract

This study explores the effect of inflation on income inequality in a growth model with variety expansion and menu costs. Inflation is found to determine income inequality via both asset-value and interest-rates effects. Our numerical analyses show that higher inflation turns these effects negative, stifling economic growth and mitigating income inequality.

Keywords: Inflation, Income inequality, Menu costs, Variety expansion

Suggested Citation

Zheng, Zhijie and Mishra, Tapas and Yang, Yibai, Inflation and Income Inequality in a Variety-Expansion Growth Model With Menu Costs (June 23, 2020). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3634261

Zhijie Zheng (Contact Author)

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Tapas Mishra

Southampton Business School, University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Yibai Yang

University of Macau ( email )

Macau
China

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