Profits and capital accumulation in the Mexican economy

Carlos A Ibarra

Cambridge Journal of Economics, 2024, vol. 48, issue 3, 525-548

Abstract: The paper studies the long-run disconnection between a rising profit share of income and a constant rate of capital accumulation in Mexico since the early 1990s. According to stylized facts based on the Cambridge accumulation equation, the disconnection reflects two factors: first, a flat trajectory of the investment share of profits, and second, a gap between a rising profit share and a constant or even falling profit rate due to a decline in the output/capital ratio. In manufacturing—where the disconnection was particularly sharp—econometric estimates show that the accumulation rate was negatively affected not only by the decline in the output/capital ratio but also by a fall in the relative Mexican/US profit rate. The estimates show in addition that, among financialization indicators, a rise in interest payments as a share of profits may have contributed to the low accumulation rate.

Keywords: Capital accumulation; Profit rate; Profit share; Output/capital ratio; Profits–investment puzzle (search for similar items in EconPapers)
Date: 2024
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