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The Effects of China’s Inflation on Wealth Inequality
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TitleThe Effects of China’s Inflation on Wealth Inequality  
AuthorChen Yanbin, Chen Weize, Chen Jun and Qiu Zhesheng  
OrganizationRenmin University of China; Boston University;tockholm School of Economics;University of Pennsylvania;;; 
Key WordsInflation; Wealth Inequality; Inflation Welfare Cost; Engel Index; Dual Economy 
AbstractBased on the analysis of asset portfolio and consumption structure while previous literatures merely focus on households’ portfolio structure, this paper builds up a Bewley model with two sectors and two products to study the effects of China’s inflation on wealth inequality. The results show us that as inflation rate rises from 0 to 5%, wealth inequality will be intensified, and the percentage of net wealth loss of poor households could be over 30 times as many as that of rich households, and rural households suffer higher welfare loss than the urban do. The poor due to holding higher proportion of money generally suffer more wealth reduction and welfare loss; more importantly, China’s inflation with structural characteristic would further deteriorate consumption structure of high-Engel-Index households, especially the rural and the poor, causing wealth reduction and higher welfare loss.  
Serial NumberWP517 
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