Abstract
There is almost general agreement that inflation is unjust. Thus it seems to be generally accepted that it has important effects on distribution. However, the nature and direction of these effects is somewhat less certain. In popular discussion, each of the various groups usually argues that its own share of the cake is being reduced while everybody else is gaining.1 It is true that, in economics, opinions are less contradictory. So we read in Samuelson’s text: ‘The two processes of inflation and deflation cause definite and characteristic changes in … the distribution of income among economic classes. … Inflation tends to favor debtors and profit receivers at the expense of creditors and fixed-income receivers.’2 On the whole, this seems to be the prevalent opinion today, and it is plausible enough. There are, however, surprisingly few serious attempts to advance beyond the limits of the intuitively plausible into the vast territory of unsolved problems.3 This rather unsatisfactory state of our knowledge can hardly be improved radically by this study. Its main purpose will be (1) to derive a group of explanatory variables from which the distributive effects of post-war inflation can be estimated; (2) to rank these variables according to their relative importance, and (3) to illustrate some general considerations by making tentative estimates for the American economy. Attention will be concentrated on the distribution of income while wealth is not considered explicitly.
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Notes
Economics — an Introductory Analysis (3rd ed.), New York, Toronto, London, 1955, pp. 248 ff. Cf. also Forstmann, Volkswirtschaftliche Theorie des Geldes, vol. ii, Berlin, 1955, p. 752 f.
In their paper ‘The Redistributional Effects of Inflation’, Review of Economics and Statistics, vol. xxxix, February 1957, pp. 1 ff., Bach and Ando give a very stimulating introduction to the problem. The hypothesis that debtor firms are gaining relative to creditor firms was tested by Kessel, ‘Inflation-Caused Wealth Redistribution: A Test of a Hypothesis’, American Economic Review, vol. xlvi, March 1956, pp. 128 f. I have also been fortunate enough to see the first part of an unpublished paper by Alchian and Kessel which studies the hypothesis that businesses gain during inflation because wages lag behind prices.
Cf. Peacock and Ryan, ‘Wage Claims and the Pace of Inflation (1948–51)% Economic Journal, 1953, pp. 385 ff.
Cf. Friedman, A Theory of the Consumption Function, Princeton, 1957, pp. 69 f.
Goldsmith and others, A Study of Saving in the United States, vol. iii, Princeton, 1956, p. 123.
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© 1962 International Economic Association
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Niehans, J. (1962). The Effects of Post-War Inflation on the Distribution of Income. In: Hague, D.C. (eds) Inflation. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08455-5_6
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