ABSTRACT
The chapter deals with the price trajectories induced by changes in income distribution. The question that we deal with is whether and, to what extent, the movement of prices is monotonic or not. The analysis shows that the price trajectories depend primarily on the dispersion of capital intensities of industries relative to the Sraffian standard ratio. Furthermore, a minor price effect may be detected emanating from the elasticity of capital intensity with respect to the rate of profit. In case of circulating capital model, the likelihood of non-monotonic movement in prices is relatively slim. However, it is possible to have inflection and even relative extremes in price trajectories as well as change in the characterizations of industries from capital- to labor-intensive for extremely high or low relative rates of profit depending on the distribution of capital intensities relative to the standard ratio. These possibilities are even more limited in the case of the fixed capital model. The empirical evidence from the USA is consistent and lends further support to these theoretical propositions.
