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The Relationship Between The Inflation Rate And Inequality Across U.S. States: A Semiparametric Approach, Mehmet Balcilar, Shinhye Chang, Rangan Gupta, Stephen M. Miller

Economics Faculty Publications

This paper uses a cross-state panel for the United States over the 1976–2007 period to assess the relationship between income inequality and the inflation rate. Employing a semiparametric instrument variable (IV) estimator, we find that the relationship depends on the level of the inflation rate. A positive relationship occurs only if the states exceed a threshold level of inflation rate. Below this value, inflation rate lowers income inequality. The results suggest that a nonlinear relationship exists between income inequality and the inflation rate. © 2018 Springer Science+Business Media B.V., part of Springer Nature