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Schumpeterian Profits in the American Economy: Theory and Measurement

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  • William D. Nordhaus

Abstract

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

Suggested Citation

  • William D. Nordhaus, 2004. "Schumpeterian Profits in the American Economy: Theory and Measurement," NBER Working Papers 10433, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10433
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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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