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Have greed and rapidly rising wages triggered a profit-wage-price spiral? Firm-level evidence for Belgium

Author

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  • Bijnens, Gert
  • Duprez, Cédric
  • Jonckheere, Jana

Abstract

Our study of Belgian firms found that 2022 price increases were largely attributable to rising intermediate input costs. Wage increases also contributed to prices hikes. Interestingly, markups appeared to play no role in driving up prices and in fact decreased or even offset the contribution of wages. In a country with automatic wage indexation, this is an important point for discussion in the debate on the profit-price or wage-price spiral.

Suggested Citation

  • Bijnens, Gert & Duprez, Cédric & Jonckheere, Jana, 2023. "Have greed and rapidly rising wages triggered a profit-wage-price spiral? Firm-level evidence for Belgium," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003671
    DOI: 10.1016/j.econlet.2023.111342
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    References listed on IDEAS

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    1. Jan De Loecker & Frederic Warzynski, 2012. "Markups and Firm-Level Export Status," American Economic Review, American Economic Association, vol. 102(6), pages 2437-2471, October.
    2. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2019. "International Shocks, Variable Markups, and Domestic Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(6), pages 2356-2402.
    3. Andrew Glover & Jose Mustre-del-Rio & Alice von Ende-Becker, 2023. "How Much Have Record Corporate Profits Contributed to Recent Inflation?," Economic Review, Federal Reserve Bank of Kansas City, vol. 0(no.1), pages 1-13, January.
    4. Fabrizio Colonna & Roberto Torrini & Eliana Viviano, 2023. "The profit share and firm markup: how to interpret them?," Questioni di Economia e Finanza (Occasional Papers) 770, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    Keywords

    Markups; Greedflation; Wages; Profits; Wage-price spiral; Profit-wage-price spiral;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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