Inflation and Income Inequality : A Shopping-Time Aproach

Our work is based on a simplified heterogenous-agent shopping time economy in which economic agents present distinct productivities in the production of the consumption good, and differentiated access to transacting assets. The purpose of the model is to investigate whether, by focusing the analysis solely on endogenously determined shopping times, one can generate a positive correlation between inflation and income inequality. Our main result is to show that, provided the productivity of the interest-bearing asset in the transacting technology is high enough, it is true true that a positive link between inflation and income inequality is generated. Our next step is to show, through analysis of the steady-state equations, that our approach can be interpreted as a mirror image of the usual inflation-tax argument for income concentration. An example is offered to illustrate the mechanism