Exploring the Profit-Investment Puzzle: A Post-Keynesian Analysis of Market Concentration and Stagnation

Zachary Knauss ()
Additional contact information
Zachary Knauss: Department of Economics, New School For Social Research, USA

No 2409, Working Papers from New School for Social Research, Department of Economics

Abstract: The profit-investment puzzle, characterized by the disconnect between rising corporate profits and stagnant capital investment, has become a focal point in recent economic research. This paper argues that the traditional pro-competitive policy framework, which attributes this phenomenon primarily to anti-trust failures, is insufficient for a comprehensive understanding. Instead, it posits that the post-Keynesian tradition, particularly the work of Josef Steindl, provides a more robust theoretical foundation for analyzing the relationship between market concentration and investment behavior. Steindl's insights into oligopoly dynamics and their impact on capacity utilization and investment decisions are applied to recent trends in U.S. industries. The paper includes both theoretical exploration and empirical analysis, employing econometric tests on data from 1972 to 2017. The results support Steindl's hypothesis of a pro-cyclical relationship between deviations in normal and actual capacity utilization rates and industry-wide investment rates, suggesting that increased market concentration leads to persistent underutilization of capacity and stagnation. This comprehensive analysis challenges the prevailing view that simply enhancing anti-trust enforcement can resolve the profit-investment gap, emphasizing instead the need for nuanced policies that address both market structures and broader economic dynamics.

Keywords: Secular stagnation; capacity utilization; market concentration; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 E22 L13 L40 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-06
New Economics Papers: this item is included in nep-com, nep-hme, nep-ind and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economicpolicyresearch.org/econ/2024/NSSR_WP_092024.pdf First version, 2024 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:2409

Access Statistics for this paper

More papers in Working Papers from New School for Social Research, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Mark Setterfield ().