PRICE AND WAGE STICKINESS, INFLATION AND PROFITS

This paper investigates the relationship between firm mark‐ups and inflation. In sectors of the economy with industries characterized by flexible prices and sticky wages, mark‐ups should respond positively to inflation. Industry mark‐ups in sectors with both flexible prices and flexible wages theore...

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Bibliographic Details
Published inThe Manchester school Vol. 80; no. 3; pp. 263 - 278
Main Authors GWIN, CARL, VanHOOSE, DAVID D.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.06.2012
University of Manchester
SeriesManchester School
Subjects
Correlation analysis
Economic forecasts
Empirical research
Flexible wages
Inflation
Markups
Price elasticity
Price level
Prices
Sticky wages
Studies
Wages & salaries
United States > US
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Summary:This paper investigates the relationship between firm mark‐ups and inflation. In sectors of the economy with industries characterized by flexible prices and sticky wages, mark‐ups should respond positively to inflation. Industry mark‐ups in sectors with both flexible prices and flexible wages theoretically may rise or fall in response to an increase in the price level. Mark‐ups of industries in sectors of the economy in which prices are sticky should respond negatively to inflation, with an absolutely larger negative response occurring in sticky‐price industries with flexible wages. Empirical analysis of US industries provides support for nearly all of these theoretical predictions.
Bibliography:Manuscript received 21.8.09; final version received 10.7.10.
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ArticleID:MANC2241
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ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1463-6786
1467-9957
DOI:10.1111/j.1467-9957.2011.02241.x