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The Measurement of Prices of Production: An Alternative Approach

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  • Peter Flaschel
  • Reiner Franke
  • Roberto Veneziani

Abstract

This paper analyzes the theoretical and methodological issues related to the empirical measurement of prices of production and wage-profit curves. A number of shortcomings of the standard approach are discussed, focusing in particular on the neglect of capital stock matrices and on the empirically objectionable assumption of uniform profit rates. An alternative approach for the empirical analysis of wage-profit curves and prices of production is proposed and its main properties are investigated using a new dataset on the German economy (1991--99). It is suggested that a Leontief-Bródy approach (augmented by profit rate differentials) is more appropriate for the analysis of wage-profit curves and prices of production than the purely theoretically oriented Sraffa-von Neumann framework.

Suggested Citation

  • Peter Flaschel & Reiner Franke & Roberto Veneziani, 2012. "The Measurement of Prices of Production: An Alternative Approach," Review of Political Economy, Taylor & Francis Journals, vol. 24(3), pages 417-435, July.
  • Handle: RePEc:taf:revpoe:v:24:y:2012:i:3:p:417-435
    DOI: 10.1080/09538259.2012.701920
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    File URL: http://hdl.handle.net/10.1080/09538259.2012.701920
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    References listed on IDEAS

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    1. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592, October.
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    1. Flaschel, Peter & Fröhlich, Nils & Veneziani, Roberto, 2011. "The sources of profitability," MPRA Paper 30861, University Library of Munich, Germany.

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