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Decline in the US profit rate: a sectoral analysis

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  • Merih Uctum
  • Sandra Viana

Abstract

The profit rate is a key element in the cyclical growth of economies because of its effect on investment and saving behaviour and, therefore, on capacity, productivity and competitiveness. The US industry profit rates have declined dramatically since the 1950s. This decline is analysed and the factors that explain it are determined. It is found that sectoral factor productivities and real factor prices account for most of this decline. The real wage has a stronger effect on manufacturing profit rates, while the real capital price explains better profitability in nonmanufacturing industries. A rise in both factor prices reduces the profit rates during the 1960s and the 1970s. After 1980, a fall in the real price of capital with a sustained improvement in technology account for the stabilization of the declining trends in sectoral profit rates. Breaking with the trends in other industries, technology accounts for most of the decline in the finance, insurance and real estate sector throughout the sample.

Suggested Citation

  • Merih Uctum & Sandra Viana, 1999. "Decline in the US profit rate: a sectoral analysis," Applied Economics, Taylor & Francis Journals, vol. 31(12), pages 1641-1652.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:12:p:1641-1652
    DOI: 10.1080/000368499323166
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    References listed on IDEAS

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    1. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
    2. Uctum, Merih, 1998. "Why Have Corporate Profits Declined? An International Comparison," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 234-251, May.
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    Cited by:

    1. Alberto Russo, 2014. "Elements of Novelty, Known Mechanisms, and the Fundamental Causes of the Recent Crisis," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 743-764.
    2. Russo, Alberto & Zanini, Adelino, 2010. "On the expansion of finance and financialisation," MPRA Paper 26828, University Library of Munich, Germany.
    3. Russo, Alberto, 2010. "Elementi di novità, meccanismi noti e cause di fondo della recente crisi [Elements of novelty, known mechanisms, and fundamental causes of the recent crisis]," MPRA Paper 21648, University Library of Munich, Germany.
    4. Russo, Alberto, 2012. "From the Neoliberal crisis to a new path of development," MPRA Paper 38004, University Library of Munich, Germany.
    5. Trofimov, Ivan D., 2022. "Determinants of the profit rates in the OECD economies: A panel data analysis of the Kalecki's profit equation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 380-397.

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