DOES INEQUALITY CAUSE INFLATION - THE POLITICAL-ECONOMY OF INFLATION,TAXATION AND GOVERNMENT DEBT

A democratic society in which the distribution of wealth is unequal el ects political parties that are likely to represent the interests of p oor people. It is in the interests of the clientele of the resulting g overnments to attempt to levy inflation taxes in order to erode the re al value of debt service and redistribute from the rich to the poor. C onsequently, inequality and high levels of nominal government debt sow the seeds for inflation. Some cross-country evidence for this proposi tion is provided.