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Firms’ margins behaviour in response to energy shocks: evidence from the UK

Manuel, Ed, Piton, Sophie and Yotzov, Ivan (2024) Firms’ margins behaviour in response to energy shocks: evidence from the UK. Economics Letters, 235. ISSN 0165-1765

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Identification Number: 10.1016/j.econlet.2023.111506


How have profits behaved in the current period of sustained inflation? In part, the answer depends on how ‘profits’ are defined. Some broad measures suggest increasing profits, but conflate market and non-market sector dynamics and omit important corporate costs. This paper constructs an alternative measure of corporate profits to capture UK firm earnings in excess of all production costs. This measure has been declining since the start of 2022, consistent with evidence from historical energy shocks. This decline has not been uniform across firms, however: firms with higher market power have been better able to protect their margins; others have experienced large declines.

Item Type: Article
Official URL:
Additional Information: © 2023 Elsevier B.V.
Divisions: Economics
Subjects: H Social Sciences > HF Commerce
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Date Deposited: 15 Feb 2024 14:00
Last Modified: 15 May 2024 18:15

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