The Price Mechanism and the Distribution of Income in Kalecki’s Economics and Post-Kaleckian Economics

Abstract

The markup of prices over costs plays a central role in Kalecki’s economics. The concept originates in his microeconomic analysis of the pricing decisions of firms operating in imperfect markets under conditions of uncertainty. The ability of oligopolistic manufacturing firms to fix prices above costs, in conjunction with the assumption of constant marginal and average costs, results in a direct relationship between the price mark-up and the distribution of income between wages and profits within an industry.