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Is there a tendency for the rate of profit to fall? Econometric evidence for the U.S. economy, 1948-2007

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  • Deepankar Basu

    (University of Massachusetts Amherst)

  • Panayiotis T. Manolakos

Abstract

The law of the tendential fall in the rate of profit has been at the center of theoretical and empirical debates within Marxian political economy ever since the publication of Volume III of Capital. An important limitation of this literature is the absence of a comprehensive econometric analysis of the behaviour of the rate of profit. In this paper, we attempt to fill this lacuna in two ways. First, we investigate the time series properties of the profit rate series. The evidence suggests that the rate of profit behaves like a random walk and exhibits "long waves" interestingly correlated with major epochs of U.S. economic history. In the second part, we test Marx's law of the tendential fall in the rate of profit with a novel econometric model that explicitly accounts for the counter-tendencies. We find evidence of a long-run downward trend in the general profit rate for the US economy for the period 1948-2007. JEL Categories: B51, C22, E11

Suggested Citation

  • Deepankar Basu & Panayiotis T. Manolakos, 2010. "Is there a tendency for the rate of profit to fall? Econometric evidence for the U.S. economy, 1948-2007," UMASS Amherst Economics Working Papers 2010-04, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2010-04
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    References listed on IDEAS

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    1. Dumenil, Gerard & Levy, Dominique, 2003. "Technology and distribution: historical trajectories a la Marx," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 201-233, October.
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    Cited by:

    1. Ivan D. Trofimov, 2017. "Profit rates in the developed capitalist economies: a time series investigation," PSL Quarterly Review, Economia civile, vol. 70(281), pages 85-128.
    2. Trofimov, Ivan D., 2017. "Profit rates in the developed capitalist economies: a time series investigation," MPRA Paper 79529, University Library of Munich, Germany.

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    More about this item

    Keywords

    falling rate of profit; Marxian political economy; time series analysis; unit roots.;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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