Regulating rates of return do gravitate in US manufacturing!
In this paper we test for the gravitation of regulating return rates, namely those return rates yielded by capital goods incorporating the best methods of production. We define them within a vintage capital model taking into consideration capacity utilization, capital depreciation, and wages of workers using past capital vintages. We consider two datasets regarding US manufacturing activities and we find that gravitation does take place. Our results are contrasted with those of the previous literature. Research and policy implications are discussed.
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