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

Ivan D. Trofimov ()
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Ivan D. Trofimov: Kolej Yayasan Saad Business School (Malaysia)

PSL Quarterly Review, 2017, vol. 70, issue 281, 85-128

Abstract: This paper examines whether there is empirical evidence to support the hypothesis of a 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. We use linear trend, Augmented Dickey-Fuller (ADF) tests, and allow for structural breaks and instabilities in the series. Our results suggest that profit rates in OECD economies exhibited a variety of patterns, including stochastic and deterministic trends, random walk, reversals, as well as stability. The secular decline (fluctuation around a falling deterministic trend) hypothesis is supported for Canada, Portugal and the USA, while secular rise is witnessed for Greece and Norway.

Keywords: Profit rate; autoregressive model; structural breaks; trend (search for similar items in EconPapers)
JEL-codes: B5 C22 P17 (search for similar items in EconPapers)
Date: 2017
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