Inflation and Wealth Distribution

Heer, Burkhard; Süssmuth, Bernd

doi:10.2139/ssrn.371582

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Inflation and Wealth Distribution

26 Pages Posted: 22 Jan 2003

See all articles by Burkhard Heer

Burkhard Heer

University of Augsburg; CESifo (Center for Economic Studies and Ifo Institute)

Bernd Süssmuth

University of Leipzig; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2003

Abstract

The effect of a permanent change of inflation on the distribution of wealth is analyzed in a general equilibrium OLG model that is calibrated with regard to the characteristics of the US economy. Poor agents accumulate savings predominantly in the form of money, while rich agents participate in the stock market and accumulate equity. Surprisingly, an increase of inflation results in a lower stock market participation rate; in addition, the distribution of wealth becomes more unequal, even though the quantitative effect is economically negligible. Furthermore, we show that the welfare costs of anticipated inflation are considerably lower than in Imrohoroglu (1992).

Keywords: Inflation, Welfare Costs, Wealth Distribution, Stock Market Participation

JEL Classification: D31, E31, E44, E52

Suggested Citation: Suggested Citation

Heer, Burkhard and Süssmuth, Bernd, Inflation and Wealth Distribution (January 2003). Available at SSRN: https://ssrn.com/abstract=371582 or http://dx.doi.org/10.2139/ssrn.371582