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Technical Change, Income Distribution, and Profitability in Multisector Linear Economies

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  • Weikai Chen

    (Department of Economics, University of Massachusetts Amherst)

Abstract

This paper analyzes the effect of technical change on income distribution and profitability by comparing the long-run outcomes defined by a uniform profit rate in a multisector linear economy. We study three scenarios with (i) fixed real wage; (ii) fixed profit rate; or (iii) fixed wage-profit ratio, and show that any viable capital-using and labor-saving technical change itself (in the absence of power change) would bring about a fall in the rate of profit. Profit rate would not rise unless the technical change is so power-biased against the working-class that the wage-profit ratio can not be maintained. Our result conclusively supports the argument of the falling rate of profit due to a rising organic composition of capital as an underlying economic force.

Suggested Citation

  • Weikai Chen, 2019. "Technical Change, Income Distribution, and Profitability in Multisector Linear Economies," UMASS Amherst Economics Working Papers 2019-15, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2019-15
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    File URL: https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=1275&context=econ_workingpaper
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    References listed on IDEAS

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    1. Abraham-Frois,Gilbert & Berrebi,Edmond, 1997. "Prices, Profits and Rhythms of Accumulation," Cambridge Books, Cambridge University Press, number 9780521395328.
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    Cited by:

    1. Deepankar Basu & Oscar Orellana, 2022. "Marx after Okishio: Falling Rate of Profit with Constant Rate of Exploitation," Papers 2205.08956, arXiv.org, revised May 2022.
    2. Deepankar Basu & Oscar Orellana, 2023. "Technical change, constant rate of exploitation and falling rate of profit in linear production economies," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 512-530, July.

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    More about this item

    Keywords

    Technical Change; Falling Rate of Profit; Okishio Theorem;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

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