Davide Usula

@davideusula.bsky.social

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Sardinian. Interested in (macro) labor, income distribution, industry dynamics and sometimes soccer and books. Ph.D. economics student @SantAnnaPisa

The diagram illustrates the mechanics of endogenous inflationary spirals driven by distributive conflict.

In a wage-led regime (S1), inflation is fueled by labor's attempt to recover income shares through bargaining power: rising nominal wages push prices in a catch-up cycle.

Conversely, in the profit-led regime (S2), the mechanism centers on firms' power asymmetry. Rising markups are not strictly necessary to trigger inflation: it is sufficient for firms to maintain stable margins in the face of shocks (or productivity growth) while wages stagnate (wage lag).

In this configuration, inflation acts as a shield for profits: by translating costs into prices while slowing down wage adjustments, the system operates a forced redistribution that compresses the labor share in favor of profit share. The spiral thus becomes the release valve for incompatible income claims.