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Evaluating the falling rate of profit in the context of the UK economy

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  • Alexiou, Constantinos

Abstract

In this study, by utilizing quarterly data for the UK economy over the period 1985Q1 to 2019Q4, we explore (a) the determinants of the profit rate in the context of the Marxian tradition and (b) by using a probabilistic framework of analysis, we investigate the factors associated with the occurrences of UK recessions. The evidence indicates that the wage share of income is inversely related to the profit rate whilst the capacity utilization, the capacity-to-capital ratio and the monetary expression of labour time have all a positive impact on the profit rate. Additional evidence suggests that the probability of a recession decreases with higher profitability, whilst at the same time the wage-led hypothesis is also supported. Finally, the impact of interest rates on the likelihood of UK's economic recessions is found to be insignificant.

Suggested Citation

  • Alexiou, Constantinos, 2022. "Evaluating the falling rate of profit in the context of the UK economy," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 84-94.
    • Handle: RePEc:eee:streco:v:61:y:2022:i:c:p:84-94
    DOI: 10.1016/j.strueco.2022.01.005
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    More about this item

    Keywords

    Marx; Profit rate; Wage share; UK recessions; ARDL; Probit model;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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