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Profit rates in the developed capitalist economies: a time series investigation

Author

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  • Ivan D. Trofimov

    (Kolej Yayasan Saad Business School (Malaysia))

Abstract

This paper examines whether there is empirical evidence to support the hypothesis of a secular decline in the economy-wide profit rates, as predicted by classical economic theories. We specifically consider profit rates in the OECD economies based on the national accounts data contained in the Extended Penn World Table database. We use linear trend, Augmented Dickey-Fuller (ADF) tests, and allow for structural breaks and instabilities in the series. Our results suggest that profit rates in OECD economies exhibited a variety of patterns, including stochastic and deterministic trends, random walk, reversals, as well as stability. The secular decline (fluctuation around a falling deterministic trend) hypothesis is supported for Canada, Portugal and the USA, while secular rise is witnessed for Greece and Norway.

Suggested Citation

  • Ivan D. Trofimov, 2017. "Profit rates in the developed capitalist economies: a time series investigation," PSL Quarterly Review, Economia civile, vol. 70(281), pages 85-128.
    • Handle: RePEc:psl:pslqrr:2017:21
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    More about this item

    Keywords

    Profit rate; autoregressive model; structural breaks; trend;
    All these keywords.

    JEL classification:

    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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