Search Results
Journal Article
Are Markups Driving the Ups and Downs of Inflation?
How much impact have price markups for goods and services had on the recent surge and the subsequent decline of inflation? Since 2021, markups have risen substantially in a few industries such as motor vehicles and petroleum. However, aggregate markups—which are more relevant for overall inflation—have generally remained flat, in line with previous economic recoveries over the past three decades. These patterns suggest that markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery.
Report
Resurrecting the Role of the Product Market Wedge in Recessions
Employment and hours appear far more cyclical than dictated by the behavior of productivity and consumption. This puzzle has been called ?the labor wedge? ? a cyclical intratemporal wedge between the marginal product of labor and the marginal rate of substitution of consumption for leisure. The intratemporal wedge can be broken into a product market wedge (price markup) and a labor market wedge (wage markup). Based on the wages of employees, the literature has attributed the intratemporal wedge almost entirely to labor market distortions. Because employee wages may be smoothed versions of the ...
Journal Article
Do Higher Markups Lower Labor’s Share of Income?
Higher price markups are typically associated with larger profits at the expense of labor's share of income. In this Economic Commentary, we challenge this view. The key to our argument is the reallocation of market shares toward labor-intensive firms, a reallocation caused by an increase in the prices of capital goods as a result of higher markups.