When more poor means less poverty: On income inequality and purchasing power
(2014) In Southern Economic Journal 81(1). p.232-246- Abstract
- We show theoretically that the poor can benefit from price changes induced by higher income inequality. As the number of poor increases, the market for products aimed toward the poor grows, and such products become more profitable. As a result, there are circumstances where an increase in income inequality associates with higher purchasing power of the poor. Using cross-country data on the price of one kilogram of rice and the price of a Big Mac hamburger, we confirm a negative association between income inequality and the price of inferior goods, robust to the inclusion of a large set of control variables. Results are also robust to a first difference specification and to a two-stage instrumental variables approach. Examining economic... (More)
- We show theoretically that the poor can benefit from price changes induced by higher income inequality. As the number of poor increases, the market for products aimed toward the poor grows, and such products become more profitable. As a result, there are circumstances where an increase in income inequality associates with higher purchasing power of the poor. Using cross-country data on the price of one kilogram of rice and the price of a Big Mac hamburger, we confirm a negative association between income inequality and the price of inferior goods, robust to the inclusion of a large set of control variables. Results are also robust to a first difference specification and to a two-stage instrumental variables approach. Examining economic well-being, it is thus important to analyze not only the incomes of households, but also the prices of the products and services that they buy. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/3992332
- author
- Nilsson, Therese LU and Bergh, Andreas LU
- organization
- publishing date
- 2014
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Southern Economic Journal
- volume
- 81
- issue
- 1
- pages
- 232 - 246
- publisher
- Southern Economic Association
- external identifiers
-
- wos:000338909800012
- scopus:84904672744
- ISSN
- 0038-4038
- DOI
- 10.4284/0038-4038-2013.008
- language
- English
- LU publication?
- yes
- id
- 7b359a29-39a3-4162-a84b-5239c82701fd (old id 3992332)
- date added to LUP
- 2016-04-01 14:53:41
- date last changed
- 2022-02-19 21:25:42
@article{7b359a29-39a3-4162-a84b-5239c82701fd,
abstract = {{We show theoretically that the poor can benefit from price changes induced by higher income inequality. As the number of poor increases, the market for products aimed toward the poor grows, and such products become more profitable. As a result, there are circumstances where an increase in income inequality associates with higher purchasing power of the poor. Using cross-country data on the price of one kilogram of rice and the price of a Big Mac hamburger, we confirm a negative association between income inequality and the price of inferior goods, robust to the inclusion of a large set of control variables. Results are also robust to a first difference specification and to a two-stage instrumental variables approach. Examining economic well-being, it is thus important to analyze not only the incomes of households, but also the prices of the products and services that they buy.}},
author = {{Nilsson, Therese and Bergh, Andreas}},
issn = {{0038-4038}},
language = {{eng}},
number = {{1}},
pages = {{232--246}},
publisher = {{Southern Economic Association}},
series = {{Southern Economic Journal}},
title = {{When more poor means less poverty: On income inequality and purchasing power}},
url = {{http://dx.doi.org/10.4284/0038-4038-2013.008}},
doi = {{10.4284/0038-4038-2013.008}},
volume = {{81}},
year = {{2014}},
}