Public Choice

, Volume 87, Issue 1–2, pp 143–162 | Cite as

Does inequality cause inflation?: The political economy of inflation, taxation and government debt

  • Roel M. W. J. Beetsma
  • Frederick Van Der Ploeg


A democratic society in which the distribution of wealth is unequal elects political parties that are likely to represent the interests of poor people. It is in the interests of the clientele of the resulting governments to attempt to levy inflation taxes in order to erode the real value of debt service and redistribute from the rich to the poor. Consequently, inequality and high levels of nominal government debt sow the seeds for inflation. Some cross-country evidence for this proposition is provided.


Political Economy Public Finance Political Party Poor People Democratic Society 
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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Roel M. W. J. Beetsma
    • 1
  • Frederick Van Der Ploeg
    • 2
  1. 1.LIFE/Department of EconomicsUniversity of LimburgMaastricht
  2. 2.Department of EconomicsUniversity of Amsterdam, and CEPRThe Netherlands

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