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|dc.description.abstract||Long-run differentials in interindustrial profitability are relevant for severalareas of theoretical and applied economics because they characterizethe overall nature of competition in a capitalist economy. This paper arguesthat the existing empirical models of competition in the industrial organizationliterature suffer from serious flaws. An alternative framework, based onrecent advances in the econometric modeling of the long run, is developedfor estimating the size of long-run profit rate differentials. It is shown thatthis framework generates separate, industry-specific estimates of two potentialcomponents of long-run profit rate differentials identified in economictheory. One component, the noncompetitive differential, stem from factorsthat do not depend directly on the state of competition; these factors aregenerally characterized as risk and other premia. The other component, thecompetitive differential, is due to factors that directly depend on the stateof competition (factors such as degree of concentration and economies ofscale). Estimates provided here show that during the period under study,the group of industries with statistically insignificant competitive differentialsaccounted for 72 percent of manufacturing profits and 75 percent ofmanufacturing capital stock, which is interpreted as lending support to thetheories of competition advanced by the classical economists and their modernfollowers.||en_US|
|dc.publisher|||aLevy Economics Institute of Bard College |cAnnandale-on-Hudson, NY||-|
|dc.relation.ispartofseries|||aWorking papers / Bard College, Jerome Levy Economics Institute |x321||en_US|
|dc.title||Testing Profit Rate Equalization in the U.S. Manufacturing Sector: 1947-1998||en_US|
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