Inflation and Income Distribution
It has for a long time been recognised that inflation, and especially unanticipated inflation, causes changes in income distribution. In particular, it has often been pointed out how, in an unanticipated inflation, holders of assets demoninated in nominal terms will suffer. Other groups, especially pensioners, whose nominal incomes are fixed, also lose in times of inflation. Other discussions centre on the lag structure of wage and price responses, which can produce shifts in the income distribution as between wages and profits. More recently attention has been directed toward the distributional effects of tax systems with progressive rate structures stated in nominal terms. When such a tax system is operative, inflation can produce income losses to groups paying the higher marginal tax rates. The distribution of the offsetting gain depends, of course, on the actions of the government whose revenue has been increased.
KeywordsIncome Distribution Trade Union Real Wage Wage Increase Relative Wage
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