INFLATION, PROFITS AND MARKET POWER - TOWARDS A NEW RESEARCH AND

This naturally raises the question of the role that the rise in profits had in the post pandemic inflationary bout which we discuss in the following sections. [...] In the same vein, much of the macroeconomic discussion is centrally focussed on the role of rising wages and the state of the labour market for explaining past and predicting future inflationary pressures. [...] In a decomposition of CPI inflation the Bank of England’s Jonathan Haskel (2023) found that 21 per cent of price increases in the UK between end-2019 and end-2022 can be accounted to ‘capital costs’ (which include profits), whereas the rate in the Euro area was 34 per cent and in the US 39 per cent (figure 2.3). [...] It shows that in the US, the rise in inflation started earlier (in 2021) than in Europe (where it took off in 2022) and overall wages contributed more than in the Eurozone and the UK. [...] They find that the profit share in the Eurozone increased in agriculture, construction, mining and utilities, manufacturing, and contact-intensive services, and that the mining and utilities sector saw the largest increase.