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Profit rate dynamics, income distribution, structural and technical change in Denmark, Finland and Italy

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  • Vaona, Andrea

Abstract

Under less restrictive assumptions than in previous contributions, this paper highlights various patterns of profit rate dynamics that are common to the countries under scrutiny. Without a substantial re-distribution of income in favour of profits, the profit rate declines. When labour productivity is weak the profits/wages ratio declines leading to a decline in the profit rate, also due to capital deepening. Developments in the capital-labour ratio tend to increase the organic composition of capital while those in the ratio between the capital price deflator and the average wage tend to decrease it. Falls in the profit rate took place in countries with a weak technological change with episodes of Marxian bias. Employment shifted from low to high capital intensity sectors, from low to high organic composition industries and from low to high productivity sectors. Rising strength of labour and realization failures tend to have a greater role than rising organic composition in cyclical profit rate dynamics. Over the cycle, the first mechanism is also the first one to show up, while the others tend to follow it. Theoretical and policy implications are offered.

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  • Vaona, Andrea, 2011. "Profit rate dynamics, income distribution, structural and technical change in Denmark, Finland and Italy," Structural Change and Economic Dynamics, Elsevier, vol. 22(3), pages 247-268, September.
    • Handle: RePEc:eee:streco:v:22:y:2011:i:3:p:247-268
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    2. Strohmaier, R. & Rainer, A., 2016. "Studying general purpose technologies in a multi-sector framework: The case of ICT in Denmark," Structural Change and Economic Dynamics, Elsevier, vol. 36(C), pages 34-49.
    3. Vaona, Andrea, 2015. "Price–price deviations are highly persistent," Structural Change and Economic Dynamics, Elsevier, vol. 33(C), pages 86-95.
    4. Sangjun Jeong, 2017. "Biased Technical Change and Economic Growth: The Case of Korea, 1970–2013," Research in Political Economy, in: Return of Marxian Macro-Dynamics in East Asia, volume 32, pages 81-103, Emerald Group Publishing Limited.
    5. Magnani, Natalia & Vaona, Andrea, 2013. "Regional spillover effects of renewable energy generation in Italy," Energy Policy, Elsevier, vol. 56(C), pages 663-671.
    6. A. Rainer & R. Strohmaier, 2014. "Modeling the diffusion of general purpose technologies in an evolutionary multi-sector framework," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(3), pages 425-444, August.
    7. Andrea Vaona, 2012. "Price-price deviations are highly persistent - extended version," Working Papers 08/2012, University of Verona, Department of Economics.
    8. Silvia Domeneghetti & Andrea Vaona, 2015. "Regional aspects of aggregate profitability dynamics in Italy," Working Papers 04/2015, University of Verona, Department of Economics.
    9. Alice Tescari & Andrea Vaona, 2012. "Gender employment disparities, financialization and profitability dynamics on the eve of Italy's long crisis," Working Papers 22/2012, University of Verona, Department of Economics.

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    More about this item

    Keywords

    Profits Wages Labour productivity Organic composition of capital Capital intensity;

    JEL classification:

    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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