Unemployment, Inflation and Income Distribution: A Cross- country Analysis



This is the first study to attempt to explain income inequality using unemployment and inflation and international cross-sectional data. Using a SURE system, inflation is found to have an increasing impact on the shares of the lower 80% of the income distribution, while reducing the share of the highest 20%. Unemployment has a negative effect on the share of the first 40%, while increases the share of the highest 60%. When unemployment and inflation are controlled for, the level of inequality is significantly lower in developed countries.