Imperfect Competition and the Theory of the Falling Rate of Profit
According to the Okishio theorem, profit-maximizing firms will not introduce new techniques which, when adopted by all firms, reduce the rate of profit. This paper presents a simple model which shows that this conclusion need not hold under imperfect competition. The model excludes working-class pressures for increased real wages - the supply of labor is infinitely elastic at a given money wage rate - and it is assumed that firms aim to maximize profits. It is shown that, if the economy starts from an initial position with a low organic composition, then the rate of profit will fall. Asymptotically, the profit rate approaches a long-run equilibrium value, but the model may explain some of the observed decline in profitability during the early stages of industrialization.
Year of publication: |
1992
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Authors: | Skott, Peter |
Published in: |
Review of Radical Political Economics. - Union for Radical Political Economics. - Vol. 24.1992, 1, p. 101-113
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Publisher: |
Union for Radical Political Economics |
Saved in:
Online Resource
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