In a recent post focusing on inflation and distribution, I touched on the connection between the aggregate markup and income distribution. Here, I thought it might be worth demonstrating the connection explicitly, and then outlining a simple extension that brings out the impact on distribution not only of the markup but also fluctuations in the prices of raw materials. The extension is due to Kalecki, who outlines the argument in the second chapter of his Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy, first published in 1954.

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