Cost-Push and Conflict Inflation

Abstract

Chapter 10 described the workings of demand-pull inflation. Such inflations were identified with persistent aggregate nominal demand growth, and operated under conditions in which the distribution of income between capital and labor was uncontested. This chapter develops the theory of conflict inflation, which may be viewed as the lineal descendant of the theory of cost-push inflation developed in the 1950s. The cost-push approach to inflation emphasized the causal role of rising costs in factor markets, which were then passed on as higher output prices. Conflict inflation follows this line of reasoning, but identifies the source of inflation as the struggle between workers and firms over the distribution of income. In terms of the model presented in Chapter 10, this amounts to recognizing the endogenous and contested character of the mark-up, m.