Industry rates of return in Korea and alternative theories of competition: equalising convergence versus tendential equalisation

Trofimov, Ivan D. (2018): Industry rates of return in Korea and alternative theories of competition: equalising convergence versus tendential equalisation.

Abstract

This paper considers convergence and equalisation in industry profit rates in the Republic of Korea in the period of 1970–2015, from the perspective of alternative paradigms of competition – classical and neoclassical. Two measures of profitability are estimated: average rate of profit based on the total capital stock in the economy, and incremental rate of profit (IROP) based on the concept of regulating capital. It is shown that little convergence in industry rates of profit occur when the former measure is used, while almost complete equalisation of IROP is achieved. The classical-type equalisation takes place in particular capital accumulation and competitive settings in Korea, characterised by the prominent role of diversified conglomerate firms, the capital flows within conglomerates, investment coordination by the state, and the fast pace of capital accumulation and renewal).

• Item Type: MPRA Paper
• Language: English
• Keywords: Convergence, gravitation, average profit rate, incremental profit rate, unit roots
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; L - Industrial Organization > L0 - General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L70 - General; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L90 - General

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