Energy inflation and consumption inequality

Abstract

This paper examines the effects of higher energy prices on consumption inequality for a large panel of 129 advanced and developing economies during the period 1970–2013. The results suggest that energy inflation increases the Gini measure of consumption inequality and reduces (increases) the share of consumption of lower (higher) income deciles. These effects are larger in developing economies, in countries with limited access to finance, in those with weaker monetary policy frameworks, during periods of economic slack and in cases where government transfers do not compensate the poorer deciles during times of adverse income shocks.