Technical Change, Income Distribution, and Profitability in Multisector Linear Economies
Weikai Chen ()
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Weikai Chen: Department of Economics, University of Massachusetts Amherst
UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics
This paper analyzes the effect of technical change on income distribution and profitability by comparing the long-run outcomes defined by a uniform profit rate in a multisector linear economy. We study three scenarios with (i) fixed real wage; (ii) fixed profit rate; or (iii) fixed wage-profit ratio, and show that any viable capital-using and labor-saving technical change itself (in the absence of power change) would bring about a fall in the rate of profit. Profit rate would not rise unless the technical change is so power-biased against the working-class that the wage-profit ratio can not be maintained. Our result conclusively supports the argument of the falling rate of profit due to a rising organic composition of capital as an underlying economic force.
Keywords: Technical Change; Falling Rate of Profit; Okishio Theorem (search for similar items in EconPapers)
JEL-codes: B51 D33 D5 (search for similar items in EconPapers)
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