IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_7.html
   My bibliography  Save this paper

Why Is The Rate of Profit Still Falling?

Author

Listed:
  • Thomas R. Michl

Abstract

This paper elaborates a fixed-coefficient, capital, labor, non-raw material intermediates, raw materials production model; estimates the wage share-profit rate frontier associated with it for U.S. manufacturing from 1949 to 1986; and suggests the following explanation of declining profitability. From 1949 to 1970, a rising wage share drove the manufacturing industries up along the wage-profit frontier. Declines in relative raw material prices shifted the frontier out in this period. From 1970 to 1986, raw material prices shocks shifted the frontier in, but as raw material prices declined in the 1980s, the failure of either the wage share or the rate of profit to recover to their previous levels suggests that a secular decline in the output-capital ratio has rotated the frontier inwards. This finding has significance for the tneory of technical change.

Suggested Citation

  • Thomas R. Michl, 1988. "Why Is The Rate of Profit Still Falling?," Economics Working Paper Archive wp_7, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_7
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp7.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roemer, John E., 1977. "Technical change and the "tendency of the rate of profit to fall"," Journal of Economic Theory, Elsevier, vol. 16(2), pages 403-424, December.
    2. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Howes, Candace & Singh, Ajit, 1995. "Long-term trends in the World economy: The gender dimension," World Development, Elsevier, vol. 23(11), pages 1895-1911, November.
    2. Christopher A. Pissarides, 2003. "Unemployment in Britain: A European Success Story," CESifo Working Paper Series 981, CESifo.
    3. Michael Bruno, 1994. "Stabilization and Reform in Eastern Europe: A Preliminary Evaluation," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, Country Studies, pages 19-50, National Bureau of Economic Research, Inc.
    4. Wallenius, Johanna, 2022. "R(a)ising employment of older individuals," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    5. David Kucera, 1998. "Unemployment and External and Internal Labor Market Flexibility: A Comparative View of Europe, Japan, and the United States," SCEPA working paper series. 1998-21, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    6. Kenworthy, Lane, 2000. "Quantitative indicators of corporatism: A survey and assessment," MPIfG Discussion Paper 00/4, Max Planck Institute for the Study of Societies.
    7. Alan S. Blinder & Jeremy B. Rudd, 2013. "The Supply-Shock Explanation of the Great Stagflation Revisited," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 119-175, National Bureau of Economic Research, Inc.
    8. Mankiw, N Gregory, 1989. "Real Business Cycles: A New Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 79-90, Summer.
    9. Boyer, Robert, 1992. "La crise de la macroéconomie, une conséquence de la méconnaissance des institutions?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 43-68, mars et j.
    10. Horst Feldmann, 2013. "Technological unemployment in industrial countries," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1099-1126, November.
    11. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
    12. Card, David E. & De la Rica Goiricelaya, Sara, 2004. "The effect of firm-level contracts on the structure of wages: evidence from matched employer-employee data," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    13. Aurélien Goutsmedt, 2021. "From the Stagflation to the Great Inflation: Explaining the US economy of the 1970s," Revue d'économie politique, Dalloz, vol. 131(3), pages 557-582.
    14. Johannes Hörner & L. Rachel Ngai & Claudia Olivetti, 2007. "Public Enterprises And Labor Market Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 363-384, May.
    15. Christopher A. Pissarides & Giovanna Vallanti, 2004. "Productivity Growth and Employment: Theory and Panel Estimates," CEP Discussion Papers dp0663, Centre for Economic Performance, LSE.
    16. Odile Chagny & Frédéric Reynès & Henri Sterdyniak, 2002. "The equilibrium rate of unemployment : a theoretical discussion and an empirical evaluation for six OECD countries," SciencePo Working papers Main hal-01027421, HAL.
    17. Fabrizio Spargoli, 2005. "Monetary Policy Transmission Mechanisms within the European Monetary Union," Rivista di Politica Economica, SIPI Spa, vol. 95(6), pages 31-68, November-.
    18. Paqué, Karl-Heinz, 1989. "Wage gaps, hysteresis and structural unemployment: The West German labour market in the seventies and eighties," Kiel Working Papers 358, Kiel Institute for the World Economy (IfW Kiel).
    19. Mio, Hitoshi, 2002. "Identifying Aggregate Demand and Aggregate Supply Components of Inflation Rate: A Structural Vector Autoregression Analysis for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(1), pages 33-56, January.
    20. David Card & Richard B. Freeman, 2004. "What Have Two Decades of British Economic Reform Delivered?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, pages 9-62, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Elizabeth Dunn (email available below). General contact details of provider: http://www.levyinstitute.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.