Wealth Inequality of Top 1% and Inflation in the United States of America

Abstract Wealth inequality in the United States of America is high, with the top 1% holding a share of around 30% of the total wealth. Inflation hits harder the low-income households, which exacerbates the gap, but inflation also reduces the wealth of top 1%. Given this practical issue, the question is: Does inflation increase or reduce the wealth inequality of top 1% in the USA? The response to this question is a prerequisite for creating an equitable, stable, and resilient economy by allowing policymakers protect the most vulnerable from the disproportionate harm of rising prices. Therefore, this paper assesses the impact of USA inflation on inequality in the case of top 1% in the period 1989–2024 by employing the autoregressive distributed lag model (ARDL model) that allows us to check the wealth inequality-inflation nexus on both long and short-run. The results showed that inflation with its components and volatility consistently reduced inequality in the long and short-run in both the share of wealth and financial assets for top 1%. Unlike previous studies for USA, this paper shows that self-employment acted as a key mediator that decreased inequality making self-employment as a tool for poverty reduction and income equalization.