A Note on Relative Prices and Income Distribution over the US Business Cycle: 1857

Abstract

This paper investigates the relation between relative prices and the income distribution by examining variations in output and prices occurred over thirty-three US business cycles from 1857 to 2009. Using a broad database, the author shows that average relative prices in twenty-seven industries of the US economy presented a remarkably smaller variation than the corresponding variation in output levels, profits and wages. These time-series results, although not conclusive, may provide additional empirical evidence of the Ricardian claim that even relative market prices in an industrial economy are strongly dominated by the correspondent integrated unit labor costs and that changes along a wage-profit schedule will play only a secondary role in their determination.

JEL classifications: E11, E32

Keywords

relative prices business cycle income distribution

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A Note on Relative Prices and Income Distribution over the US Business Cycle: 1857–2009

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