The Measurement of Prices of Production: An Alternative Approach

Peter Flaschel, Reiner Franke and Roberto Veneziani

Review of Political Economy, 2012, vol. 24, issue 3, 417-435

Abstract: This paper analyzes the theoretical and methodological issues related to the empirical measurement of prices of production and wage-profit curves. A number of shortcomings of the standard approach are discussed, focusing in particular on the neglect of capital stock matrices and on the empirically objectionable assumption of uniform profit rates. An alternative approach for the empirical analysis of wage-profit curves and prices of production is proposed and its main properties are investigated using a new dataset on the German economy (1991--99). It is suggested that a Leontief-Bródy approach (augmented by profit rate differentials) is more appropriate for the analysis of wage-profit curves and prices of production than the purely theoretically oriented Sraffa-von Neumann framework.

Date: 2012
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DOI: 10.1080/09538259.2012.701920

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