Profitability and Growth in Multiregion Systems: Prologue to a Historical Geography

Michael Webber

Economic Geography, 1997, vol. 73, issue 4, 405-426

Abstract: Consider the OECD, and divide it into two regions: Japan and the rest. How have rates of profit, the history of capital accumulation and the growth of demand and supply, interregional investment and trade interacted to produce their historical geography? What can we learn from that data about theories of profit, growth, and interregional competition? In this paper, I estimate the parameters of a disequilibrium, dynamic, interregional model that illuminates these questions, paying particular attention to the manner in which investment is generated and flows between regions.I find a complex relationship between productivity and costs, profitability and accumulation. These variables are not well correlated over space. The evidence prompts questions about the weight that is given to profitability in interpreting the growth of regions. More important are the availability of funds (generated by the existing capital stock), the production intentions of corporations, and the investment policies of financiers. Likewise, over time profitability and accumulation are correlated, but this correlation is strong only in the long run; in the short run, rates of growth are determined far more by production decisions and investment policies than by changes in the rate of profit.

Date: 1997
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DOI: 10.1111/j.1944-8287.1997.tb00097.x

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