Macroeconomic Profitability: Theory and Evidence

The Jerome Levy Economics Institute Working Paper No. 1

99 Pages Posted: 24 Feb 2000

See all articles by Thomas R. Michl

Thomas R. Michl

Colgate University; The Levy Economics Institute

Date Written: November 1987


This paper gives an account of recent work on the measurement, statistical analysis, and theoretical analysis of macroeconomic profitability. Measurement issues include the treatment of holding gains on physical assets and net financial liabilities, national income accounting practices and recent revisions, and the use of accounting rates of return. Statistical work has focused on the identification of trends and shifts in profit rates not caused by cyclical fluctuations, and various theoretical explanations have been offered for the generally low rates of return that appeared in the 1970s. These include capital deepening stimulated by a reduction in the cost of capital funds; profit squeezes caused by some combination of slower productivity growth, real wage push, and raw material price inflation; declining capital productivity; and changes in effective tax rates.

JEL Classification: E10

Suggested Citation

Michl, Thomas R., Macroeconomic Profitability: Theory and Evidence (November 1987). The Jerome Levy Economics Institute Working Paper No. 1, Available at SSRN: or

Thomas R. Michl (Contact Author)

Colgate University ( email )

13 Oak Drive
Hamilton, NY 13346
United States
315-228-7526 (Phone)


The Levy Economics Institute

Annandale-on-Hudson, NY 12504
United States

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