Inflation, profits and market power: Towards a new research and policy agenda
Article
In the aftermath of the pandemic, as the global economy rebounded it was accompanied by a dramatic rise in inflation, reaching levels not seen since the 1970s, peaking at 9 and 11 per cent in Europe and 11 per cent in the US.
Post-pandemic, supply bottlenecks were exacerbated by an energy shock following Russia's invasion of Ukraine. While these were clearly the initial trigger of high inflation, a recent debate highlights an often-overlooked amplifying factor: corporate profits.
In this joint paper by IPPR and Common Wealth, we summarise some key aspects of the literature around this, present novel firm-level analysis across countries, and highlight gaps in the research and policy debate. We propose major policy shifts and argue in favour of a new direction for competition policy.