Inflation Inequality in Iran

EghtesadOnline: Countrywide data on inflation and income inequality show that these two concepts have a non-linear and asymmetric relationship.

News ID: ۷۵۲۰۵۸

05 December 2022

On the one hand, an increase in inflation, up to the threshold level, reduces income inequality and then it increases. For example, the inflation rate declined as household incomes increased in the United States recently. On the other hand, even during inflationary times, higher than the threshold limit (like the situation in Iran), the rate of growth in inequality with a certain increase in inflation is different from the fall in inequality with the same decrease in inflation.

What has been less surveyed in Iran’s economic literature regarding inequality and inflation is the different effect of inflation on different deciles or income classes, which is known as the inflation gap between the rich and the poor, or more precisely, inflation inequality. Mehdi Feyzi, an economist, prefaced his article for the Persian economic daily Donya-e-Eqtesad with this note. A translation of the text follows