A Statistical Equilibrium Approach to the Distribution of Profit Rates

35 Pages Posted: 8 Jun 2017

See all articles by Ellis Scharfenaker

Ellis Scharfenaker

University of Missouri at Kansas City

Gregor Semieniuk

SOAS University of London

Date Written: July 2017

Abstract

Motivated by classical political economy we detail a probabilistic, ‘statistical equilibrium’ approach to explaining why even in equilibrium, the equalization of profit rates leads to a non‐degenerate distribution. Based on this approach we investigate the empirical content of the profit rate distribution for previously unexamined annual firm level data comprising over 24,000 publicly listed North American firms for the period 1962–2014. We find strong evidence for a structural organization and equalization of profit rates on a relatively short time scale both at the economy wide and one‐ and two‐digit SIC industry levels into a Laplace or double exponential distribution. We show that the statistical equilibrium approach is consistent with economic theorizing about profit rates and discuss research questions emerging from this novel look at profit rate distributions. We also highlight the applicability of the underlying principle of maximum entropy for inference in a wide range of economic topics.

Suggested Citation

Scharfenaker, Ellis and Semieniuk, Gregor, A Statistical Equilibrium Approach to the Distribution of Profit Rates (July 2017). Metroeconomica, Vol. 68, Issue 3, pp. 465-499, 2017, Available at SSRN: https://ssrn.com/abstract=2982695 or http://dx.doi.org/10.1111/meca.12134

Ellis Scharfenaker (Contact Author)

University of Missouri at Kansas City ( email )

5100 Rockhill Road
Kansas City, MO 64110-2499
United States

Gregor Semieniuk

SOAS University of London

Thornhaugh St
Russell Square
London, Camden WC1H 0XG
United Kingdom

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