Relation of Profit to Monopoly Power, Investment, and Economic Expansion in the Contemporary United States Economy
Sunday, Jan. 6, 2019 10:15 AM - 12:15 PM
- Chair: David M. Kotz, University of Massachusetts-Amherst
The United States Corporate Profits, Monopoly Power and New Technologies
AbstractThis paper is an examination into the profitability of U.S. public corporations with the aim of identifying the changing sources of monopoly power in the economy. Findings by Grullon etal. (2017) show that over the last two decades, 75% of U.S. industries have registered an increase in concentration levels and the firms in industries with the largest increases in concentration achieved higher profit margins. In this paper, we first decompose firm profitability into various components to better understand the role played by increasing industrial concentration. This exercise is the first step in building the argument that increase in concentration implies increase in monopoly power for firms, as reflected in higher mark-ups. Then, we analyze the relationship between firm mark-ups (monopoly power) and the use new technologies, which is captured by industry level indicators, ranging from industry classifications of technological intensity, to patents granted. The ultimate goal is to establish empirically that the use of new technologies contributes to the increasing monopoly power and concentration in the U.S. industries.
The Rate of Profit, Aggregate Demand, and the Long Economic Expansion since 2009 in the United States
AbstractThe current economic expansion in the U.S., which began in the summer of 2009, has by now lasted for almost 9 years. It is currently the second longest expansion since the end of World War II, exceeded only by the 10 year long expansion of the 1990s. The previous two expansions, of the 1990s and 2000s, were prolonged by big asset bubbles, which have played a key role in the neoliberal era in promoting economic expansions. However, the current expansion has not seen an asset bubble large enough to significantly affect the macroeconomy. This paper examines the expansion since 2009 by analyzing the movements of the rate of profit, and its determinants, and the role of aggregate demand, with the aim of determining the factors that have kept crisis tendencies at bay so far.
Revisiting the Investment-Profit Puzzle: The Role of Intangible Assets
AbstractStarting around the early 2000s, the rate of capital accumulation for US nonfinancial corporations has slowed down despite relatively high profitability. While the literature mostly focuses on financialization and globalization as the reasons behind this slowdown, I suggest that we need to pay attention to the increased use of intangible assets by nonfinancial corporations in the last two decades. After discussing the ways nonfinancial corporations use intangible assets, I look at large corporations in the US and find that: i-) The ratio of intangible assets to the capital stock increased in general. This increase is highest for firms in high-technology, healthcare, nondurables and telecommunications. ii-) Industries with higher intangible asset ratios have lower investment to profit ratios. iii-) Industries with higher intangible asset ratios have higher markups and profitability. iv-) The composition of the nonfinancial corporate sector has changed and the weight of high-technology and healthcare firms has increased; but this increase did not correspond to an equal increase in their investment share. The decline in the investment share of durables, nondurables and machinery is matched by an increase in the investment share of location-specific industries with low intangible asset use, most notably firms in energy extraction. In general, these firms have steadier markups and higher investment to profit ratios. v-) Yet, intangible-intensive industries capture a larger share of the profits than that suggested by their share of investment or total assets. All in all, these findings are in line with the suggestion that the increased use of intangible assets enables firms to capture higher profits without a corresponding increase in investment.
University of Massachusetts-Boston
University of Cambridge
- E1 - General Aggregative Models
- O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights