Inflation and the Income Share of the Rich

Working Paper 2021-570

Abstract

This paper examines the distributional implications of inflation on top income shares in 14 advanced economies using data over the period 1920-2016. We use Local Projections to analyze how top income shares respond to an inflation shock, and panel regressions in which all variables are defined as five-year averages to examine the impact of inflation on the position of the top-one-percent in the long run. Our findings suggest that inflation reduces the share of national income held by the top one percent. Furthermore, we find that inflation shocks and long-run inflation have similar effects on top income shares.

Authors: Mehdi El Herradi , Jakob de Haan, Aurelien Leroy.