Since firms now have to pay interes

Since firms now have to pay interest, the mark- up and the profit share inequations (9.2) and (9.3) can be decomposed into a part covering profits ofenterprise and a part covering interest income of the rentiers. If the markup remains constant in the face of interest rate changes, the real wage rateand the labour income share will not be affected. A change in the interest rate will hence not affect distribution between wages and gross profitincome, but will rather influence the distribution of gross profits betweenfirms and rentiers. If changes in the rate of interest cause changes in themark- up in the same direction, real wages and the labour income share willimmediately be affected: rising (falling) interest rates and rising (falling)mark- ups mean rising (falling) prices and cause falling (rising) real wages,assuming nominal wages to be constant. A change in the rate of interest,therefore, causes changes in the gross profit share in the same direction.In what follows, the terms ‘profit’, ‘profit share’ and ‘profit rate’ will berelated to gross profits as the sum of profits of enterprise and interest.