Technical Change, Income Distribution, and Profitability in Multisector Linear Economies
Working Paper Number
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.
UMass Amherst Open Access Policy
Chen, Weikai, "Technical Change, Income Distribution, and Profitability in Multisector Linear Economies" (2019). UMass Amherst Economics Working Papers. 273.