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When more poor means less poverty: On income inequality and purchasing power

In English

Författare

Summary, in English

We show theoretically that the poor can benefit from price changes induced by higher income inequality. As the number of poor increases, the market for products aimed toward the poor grows, and such products become more profitable. As a result, there are circumstances where an increase in income inequality associates with higher purchasing power of the poor. Using cross-country data on the price of one kilogram of rice and the price of a Big Mac hamburger, we confirm a negative association between income inequality and the price of inferior goods, robust to the inclusion of a large set of control variables. Results are also robust to a first difference specification and to a two-stage instrumental variables approach. Examining economic well-being, it is thus important to analyze not only the incomes of households, but also the prices of the products and services that they buy.

Publiceringsår

2014

Språk

Engelska

Sidor

232-246

Publikation/Tidskrift/Serie

Southern Economic Journal

Volym

81

Issue

1

Dokumenttyp

Artikel i tidskrift

Förlag

Southern Economic Association

Ämne

  • Economics
  • Economic History

Status

Published

ISBN/ISSN/Övrigt

  • ISSN: 0038-4038