Abstract
The paper examines the impact of income inequality in Russian regions on the dynamics of the overall price level. In the framework of econometric modeling based on panel data of 82 Russian regions for 2011—2020, it was evidenced that higher inequality restrains inflation, while reducing inequality accelerates price growth. To overcome the problem of endogeneity, an approach based on instrumental variables is applied. It is shown that the result is robust to changes in inequality measures, estimation methods and instrumental variables. The potential channels of influence of income distribution inequality on inflation and the effectiveness of monetary policy explaining the effect are analyzed.
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