Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227881
Authors: 
Chen, Weikai
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 2019-15
Abstract: 
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.
Subjects: 
Technical Change
Falling Rate of Profit
Okishio Theorem
JEL: 
B51
D33
D57
Document Type: 
Working Paper

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