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Profits and Rates of Return in OECD Countries

Author

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  • James H. Chan-Lee

    (OECD)

  • Helen Sutch

    (OECD)

Abstract

There is widespread concern, particularly in Europe, about the possibility of a secular decline in profits and rates of return. The purpose of this study is to assess whether there has been a decline and to quantify it as far as possible, taking measurement problems into account. It also considers summarily the significance of observed trends and the reasons for them. Profits are generally seen as an essential feature of market economies. When they are low, it is feared that enterprise and innovation will falter and the rate of investment decline, leading to sluggish growth in output and capacity. Low growth may also lead to low profits. The precise links between profits and economic performance are, however, theoretically complicated and difficult to establish empirically. This is because both economic and accounting definitions of profit cover heterogeneous phenomena and are calculated as a residual. Conceptual and measurement issues are important in assessing the evolution of ...

Suggested Citation

  • James H. Chan-Lee & Helen Sutch, 1985. "Profits and Rates of Return in OECD Countries," OECD Economics Department Working Papers 20, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:20-en
    DOI: 10.1787/468348310348
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    Cited by:

    1. Jakob B. Madsen, 2009. "The Dynamics Of Labour'S Income Shares And The Wage Curve–Phillips Curve Controversy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(1), pages 45-72, February.
    2. Maito, Esteban Ezequiel, 2014. "The historical transience of capital: the downward trend in the rate of profit since XIX century," MPRA Paper 55894, University Library of Munich, Germany.
    3. D., Ivan, 2017. "Stability of the labour shares: evidence from OECD economies," MPRA Paper 79822, University Library of Munich, Germany.
    4. Rajan, Madhav & Reichelstein, Stefan J. & Soliman, Mark T., 2006. "Conservatism, Growth, and Return on Investment," Research Papers 1956, Stanford University, Graduate School of Business.
    5. Michael Bruno, 1985. "Aggregate Supply and Demand Factors in OECD Unemployment: An Update," NBER Working Papers 1696, National Bureau of Economic Research, Inc.
    6. Ivan D. Trofimov, 2019. "Stability of Labour Shares: Evidence from OECD Economies," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(1), pages 57-89.
    7. Maito, Esteban Ezequiel, 2013. "La transitoriedad histórica del capital: La tendencia descendente de la tasa de ganancia desde el siglo XIX [The historical transience of capital: The downward trend in the rate of profit since XIX," MPRA Paper 59285, University Library of Munich, Germany.
    8. Trofimov, Ivan D., 2022. "Determinants of the profit rates in the OECD economies: A panel data analysis of the Kalecki's profit equation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 380-397.

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