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Inflation and Income Inequality: Is Food Inflation Different?
Author:
Mr. James P Walsh
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https://orcid.org/0000-0002-8839-5865
and
Jiangyan Yu
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 147
Language:
English
Publication Date:
01 Jun 2012
DOI:
https://doi.org/10.5089/9781475504163.001
ISBN:
9781475504163
ISSN:
1018-5941
Pages:
22
Keywords:
WP; food inflation; income; inflation; core inflation; commodity prices; food prices; India; China; income distribution; income inequality; inequality data; headline inflation; nonfood inflation; per capita income; incomes of the poor; Personal income; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund