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Changes in income inequality and the black market premium

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Abstract:

Is a high black market premium for US dollars associated with rising or falling income inequality within a nation? This paper empirically examines this issue within a cross section of countries and finds that the black market premium is strongly associated with rising income inequality as measured by changes in the Gini coefficient. Others have used the black market premium as a proxy to measure protectionist policies so a possible implication is that protectionist policies further skew the distribution of income within a country. However, other measures of protectionist policies are not associated with changes in income inequality. Instead, other factors which might drive the black market premium such as interest rate differentials appear to be more relevant in explaining why the black market premium is positively related with increases in income inequality.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840210134530

Affiliations: Department of Economics, Southern Illinois University, Carbondale, IL 62901, USA E-mail: ksylwest@siu.edu

Publication date: January 1, 2003

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