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Does Aggregate Profitability Really Matter?

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  • Glyn, Andrew

Abstract

The impact of profitability on capital accumulation, neglected in conventional accounts, is confirmed by a cross-sectional analysis of the postwar experience of manufacturing in OECD economies which is consistent with a body of time-series and firm-level studies. The effect of capital accumulation on growth is reviewed, suggesting a somewhat stronger impact than growth accounting assumed. Profitability recovered in most, but not all, OECD economies in the 1980s and the recovery was strongest where unemployment rose most and where labor cost competitiveness improved. The response of manufacturing investment was very patchy, however, and a number of influences that may have weakened the link to achieved profitability are discussed. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Glyn, Andrew, 1997. "Does Aggregate Profitability Really Matter?," Cambridge Journal of Economics, Oxford University Press, vol. 21(5), pages 593-619, September.
  • Handle: RePEc:oup:cambje:v:21:y:1997:i:5:p:593-619
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    Cited by:

    1. Felipe, Jesus & Laviña, Editha & Fan, Emma Xiaoqin, 2008. "The Diverging Patterns of Profitability, Investment and Growth of China and India During 1980-2003," World Development, Elsevier, vol. 36(5), pages 741-774, May.
    2. Malcolm Sawyer, 1999. "The Kaleckian Analysis and the New Millennium," Review of Political Economy, Taylor & Francis Journals, vol. 11(3), pages 303-319.
    3. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era and After," Oxford Review of Economic Policy, Oxford University Press, vol. 18(4), pages 479-494.
    4. Erik Bengtsson, 2014. "Do unions redistribute income from capital to labour? Union density and wage shares since 1960," Industrial Relations Journal, Wiley Blackwell, vol. 45(5), pages 389-408, September.
    5. Hancké, Bob, 1996. "Labour Unions, business co-ordination and economic adjustment in Western Europe, 1980-90," Discussion Papers, Research Unit: Economic Change and Employment FS I 96-309, Social Science Research Center Berlin (WZB).
    6. Hancké, Bob, 1997. "Modernisation without flexible specialisation: how large firm restructuring and government regional policies became the step-parents of autarchic regional production systems in France," Discussion Papers, Research Unit: Economic Change and Employment FS I 97-304, Social Science Research Center Berlin (WZB).
    7. Andrew Glyn, 1995. "Social Democracy and Full Employment," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 22, pages 109-126.
    8. Hancké, Bob, 1999. "Revisiting the French model: coordination and restructuring in French industry in the 1980s," Discussion Papers, Research Unit: Economic Change and Employment FS I 99-301, Social Science Research Center Berlin (WZB).
    9. James Heintz, 2002. "Capital Accumulation and Macro Policy in South Africa: Political Instability, Distributive Conflict, and Economic Institutions," Working Papers wp29, Political Economy Research Institute, University of Massachusetts at Amherst.
    10. repec:bla:metroe:v:68:y:2017:i:1:p:47-90 is not listed on IDEAS
    11. Jesus Felipe, 2005. "Aggregate Investment In The People'S Republic Of China: A Comment," CAMA Working Papers 2005-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Poterba, James M., 1998. "The rate of return to corporate capital and factor shares: new estimates using revised national income accounts and capital stock data," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 211-246, June.
    13. Felipe, Jesus, 2009. "A Cautionary Note on the Interpretation of Unit Labor Costs as an Indicator of Competitiveness, with Reference to the Philippines," Philippine Journal of Development PJD 2007 Vol. XXXIV No. 2, Philippine Institute for Development Studies.
    14. Jesus Felipe, 2005. "A Note On Competitiveness, Unit Labor Costs And Growth: Is "Kaldor'S Paradox" A Figment Of Interpretation?," CAMA Working Papers 2005-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    15. Andrew Glyn, 2002. "Labour Market Success and Labour Market Reform: Lessons from Ireland and New Zealand," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2002-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    16. Basu, Deepankar & Das, Debarshi, 2015. "Profitability and Investment: Evidence from India's Organized Manufacturing Sector," UMASS Amherst Economics Working Papers 2015-14, University of Massachusetts Amherst, Department of Economics.
    17. Erik Bengtsson, 2014. "Labour's share in twentieth-century Sweden: a reinterpretation," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 62(3), pages 290-314, November.
    18. Gilberto Tadeu Lima, 2009. "Functional Distribution, Capital Accumulation and Growth in a Non-Linear Macrodynamic Model," Journal of Income Distribution, Journal of Income Distribution, vol. 18(1), pages 3-19, March.
    19. Hancké, Bob, 2003. "Many roads to flexibility. How large firms built autarchic regional production systems in France," LSE Research Online Documents on Economics 513, London School of Economics and Political Science, LSE Library.
    20. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.
    21. James Crotty, 2002. "The Effects of Increased Product Market Competition and Changes in Financial Markets on the Performance of Nonfinancial Corporations in the Neoliberal Era," Working Papers wp44, Political Economy Research Institute, University of Massachusetts at Amherst.
    22. Bo, Hong & Driver, Ciaran & Lin, Hsiang-Chun Michael, 2014. "Corporate investment during the financial crisis: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 1-12.
    23. Glyn, Andrew, 1995. "Unemployment and inequality," Discussion Papers, Research Unit: Economic Change and Employment FS I 95-303, Social Science Research Center Berlin (WZB).
    24. Hui-lin LIN & Wen-Bin CHUANG, 2007. "Fdi And Domestic Investment In Taiwan: An Endogenous Switching Model," The Developing Economies, Institute of Developing Economies, vol. 45(4), pages 465-490.
    25. Malcolm Sawyer, 1998. "The Kaleckian Analysis and the New Mellinium," Macroeconomics 9805001, EconWPA, revised 01 Sep 1998.

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    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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