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- Title
PRICE AND WAGE STICKINESS, INFLATION AND PROFITS*.
- Authors
GWIN, CARL; VanHOOSE, DAVID D.
- Abstract
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.
- Subjects
UNITED States; INCOMES policy (Economics); WAGE control; PRICE inflation; PROFIT; BUSINESS enterprises; EMPIRICAL research
- Publication
Manchester School (1463-6786), 2012, Vol 80, Issue 3, p263
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2011.02241.x