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Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the U.S. Economy, 1948-2007

Author

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  • Deepankar Basu

    (University of Massachusetts Amherst, Amherst, MA, USA)

  • Panayiotis T. Manolakos

    (Antioch College, OH, USA)

Abstract

The law of the tendential fall in the rate of profit has been at the center of theoretical and empirical debates within Marxian political economy since the publication of volume III of Capital. An important limitation of this literature is the relative paucity of modern econometric investigations of the behavior of the rate of profit. The central objective of this paper is to remedy this lacuna. We investigate the properties of the profit rate series utilizing the methods of time series econometrics. The evidence suggests that the rate of profit is non-stationary. We also specify a test of Marx’s law of the tendential fall in the rate of profit with a novel econometric model that explicitly accounts for the counter-tendencies and their time series properties. We find weak evidence of a long-run downward trend in the general profit rate for the U.S. economy for the period 1948-2007.JEL Codes: B51, C22, E11.

Suggested Citation

  • Deepankar Basu & Panayiotis T. Manolakos, 2013. "Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the U.S. Economy, 1948-2007," Review of Radical Political Economics, Union for Radical Political Economics, vol. 45(1), pages 76-95, March.
    • Handle: RePEc:sae:reorpe:v:45:y:2013:i:1:p:76-95
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    Citations

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    Cited by:

    1. Adem Y. Elveren & Sara Hsu, 2016. "Military Expenditures and Profit Rates: Evidence from OECD Countries," Metroeconomica, Wiley Blackwell, vol. 67(3), pages 551-577, July.
    2. Trofimov, Ivan D., 2018. "The secular decline in profit rates: time series analysis of a classical hypothesis," MPRA Paper 88248, University Library of Munich, Germany.

    More about this item

    Keywords

    falling rate of profit; Marxian political economy; time-series analysis; unit roots;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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