IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_321.html
   My bibliography  Save this paper

Testing Profit Rate Equalization in the U.S. Manufacturing Sector: 1947-1998

Author

Listed:
  • Ajit Zacharias

Abstract

Long-run differentials in interindustrial profitability are relevant for several areas of theoretical and applied economics because they characterize the overall nature of competition in a capitalist economy. This paper argues that the existing empirical models of competition in the industrial organization literature suffer from serious flaws. An alternative framework, based on recent advances in the econometric modeling of the long run, is developed for estimating the size of long-run profit rate differentials. It is shown that this framework generates separate, industry-specific estimates of two potential components of long-run profit rate differentials identified in economic theory. One component, the noncompetitive differential, stems from factors that do not depend directly on the state of competition; these factors are generally characterized as risk and other premia. The other component, the competitive differential, is due to factors that depend directly on the state of competition (factors such as degree of concentration and economies of scale). Estimates provided here show that during the period under study, the group of industries with statistically insignificant competitive differentials accounted for 72 percent of manufacturing profits and 75 percent of manufacturing capital stock, which is interpreted as lending support to the theories of competition advanced by the classical economists and their modern followers.

Suggested Citation

  • Ajit Zacharias, 2001. "Testing Profit Rate Equalization in the U.S. Manufacturing Sector: 1947-1998," Economics Working Paper Archive wp_321, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_321
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp321.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Hans Matthews, 2005. "Paradise lost and found? The econometric contributions of Clive W. J. Granger and Robert F. Engle," Review of Political Economy, Taylor & Francis Journals, vol. 17(1), pages 1-28.
    2. Stefania Tescari & Andrea Vaona, 2014. "Regulating Rates of Return Do Gravitate in US Manufacturing!," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 377-396, July.
    3. Tsoulfidis, Lefteris & Tsaliki, Persefoni, 2011. "Classical competition and regulating capital: theory and empirical evidence," MPRA Paper 51334, University Library of Munich, Germany, revised 2013.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_321. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Dunn). General contact details of provider: http://www.levyinstitute.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.