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Profits and capital accumulation in the Mexican economy

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  • Carlos A Ibarra

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.

Suggested Citation

  • Carlos A Ibarra, 2024. "Profits and capital accumulation in the Mexican economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 48(3), pages 525-548.
    • Handle: RePEc:oup:cambje:v:48:y:2024:i:3:p:525-548.
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    File URL: http://hdl.handle.net/10.1093/cje/beae002
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