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

Trofimov, Ivan D. (2017): Profit rates in the developed capitalist economies: a time series investigation.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Profit rate, autoregressive model, structural breaks, trend.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B50 - General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; P - Economic Systems > P1 - Capitalist Systems > P17 - Performance and Prospects

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