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

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

Burkhard Heer (Contact Author)

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Bernd Süssmuth

University of Leipzig ( email )

IEW Institute for Empirical Research in Economics
Grimmaische Str. 12
Leipzig, D-04109
Germany
+49 341 97 33782 (Phone)
+49 341 97 33789 (Fax)

HOME PAGE: http://www.wifa.uni-leipzig.de/iew/professur-oekonometrie/team/prof-dr-bernd-suessmuth.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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