We use results from the literature on the determinants of price-cost margins to derive an equation relating labor's share of national income to the inflation rate (as well as to the output gap, the unemployment rate and the capital stock per worker). The equation is tested with a panel of 15 OECD countries. We obtain a robust positive relationship between inflation and the labor share. Our results suggest that disinflation is not distributively neutral, provide empirical support for the distinct concern about price stability shown by trade unions and employers' organizations, and help explaining the negative impact of inflation on growth.
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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number
460.00.
Find related papers by JEL classification: E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rotemberg, Julio J. & Woodford, Michael, 1999.
"The cyclical behavior of prices and costs,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135
Elsevier.
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