Inflation and the Redistribution of Wealth

OW important is it to avoid moderate inH flation, such as we have suffered intermittently since World War II? Until the 1950's there were virtually no empirical studies of the effects of inflation on the level or distribution of output and wealth, except for the great hyperinflations. Recent years have seen extensive development of the theory of inflation and a few exploratory empirical studies of the tosts of moderate, non-run-away inflation, but we still have only limited information on these costs as a basis for policy judgments, for example, when we face the much-discussed trade-off between inflation and unemployment.' This paper examines the redistributional effects of inflation on wealth-holdings of households and corporations, extending the exploratory studies just noted by utilizing information on the moderate United States infhtion during the last two decades.2