Economics Department Working Paper Series
Title
Technical Change, Income Distribution, and Profitability in Multisector Linear Economies
Working Paper Number
2019-15
Publication Date
2019
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.
DOI
https://doi.org/10.7275/15506378
License
UMass Amherst Open Access Policy
Recommended Citation
Chen, Weikai, "Technical Change, Income Distribution, and Profitability in Multisector Linear Economies" (2019). UMass Amherst Economics Working Papers. 273.
https://doi.org/10.7275/15506378