Reducing inflation to a single headline figure obscures its profoundly unequal impact across Iranian society. While official statistics present inflation as uniform, households experience it very differently depending on income levels, consumption patterns, and asset structures.
Research by economists such as Xavier Jaravel and Adrien Auclert demonstrates that inflation operates as a redistributive mechanism, transferring purchasing power from cash holders and wage-dependent households to asset owners and borrowers who have leveraged investments.
For low-income families, essential goods like food and energy make up a larger portion of their expenditure and often see higher price increases than luxury goods and services consumed by wealthier households. This structural disparity means that effective inflation for the poorest citizens is significantly higher than the official consumer price index suggests.
Meanwhile, those holding real assets or benefiting from loans with fixed nominal rates see their wealth preserved or even enhanced, creating a widening gap between economic classes.
The effects extend beyond consumption to household balance sheets. Borrowers with fixed nominal debts benefit as inflation erodes the real value of their liabilities, while cash-rich households or those reliant on fixed-income sources like bank deposits face declining purchasing power. In Iran’s financial system, where access to credit is highly unequal, the wealthy disproportionately gain from inflation-fueled asset appreciation, while middle- and lower-income households bear the brunt of rising costs.
Inflation also amplifies income disparities. Wages and salaries, constrained by annual contracts and limited bargaining power, adjust slowly, whereas rents, service fees, and corporate profits rise more rapidly. This asymmetry reduces the labor share of national output and artificially inflates capital owners’ returns. Consequently, households with higher marginal propensity to consume—typically lower- and middle-income families—see their effective income eroded, reducing overall domestic demand and turning inflation into a drag on production rather than a stimulus.
Long-Term Consequences
Persistent inflation has long-term structural consequences. Economic agents, facing an unstable monetary environment, shift priorities from productive investment and innovation to strategies aimed at preserving asset value.
The middle class, traditionally the carrier of human capital and innovation, faces reduced incentives to invest in skills or education. Talent migration toward speculative or financial sectors intensifies, weakening the economy’s productive foundation. Inflation thus becomes a mechanism that not only transfers wealth but also erodes human capital, deepening inequality and restricting social mobility.
For policymakers, the implications are clear. Tackling headline inflation without addressing its unequal distribution is insufficient. Stabilizing real interest rates, restoring monetary credibility, and providing predictability for wages and investment are essential for both economic equity and sustainable growth.
In Iran, genuine social and economic justice begins with monetary stability; without it, poverty reduction programs and wealth redistribution policies risk becoming ineffective gestures.
