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

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  • Trofimov, Ivan D.

Abstract

This paper examines whether there is empirical evidence to support the hypothesis of 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. In our analysis we use linear trend, Augmented Dickey-Fuller (ADF) tests, and also allow for structural breaks and instabilities in the series. Results suggest that profit rates in OECD economies exhibited a wide variety of patterns, including stochastic and deterministic trends, random walk, reversals, as well as stability. Secular decline (fluctuation around falling deterministic trend) hypothesis is supported for Canada, Portugal and the USA, while secular rise is witnessed for Greece and Norway.

Suggested Citation

  • Trofimov, Ivan D., 2017. "Profit rates in the developed capitalist economies: a time series investigation," MPRA Paper 79529, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79529
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    File URL: https://mpra.ub.uni-muenchen.de/79529/1/MPRA_paper_79529.pdf
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    Keywords

    Profit rate; autoregressive model; structural breaks; trend.;

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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