Schumpeterian Profits in the American Economy: Theory and Measurement

36 Pages Posted: 29 Nov 2006 Last revised: 20 Dec 2013

See all articles by William D. Nordhaus

William D. Nordhaus

Yale University - Department of Economics; Cowles Foundation, Yale University; National Bureau of Economic Research (NBER)

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Date Written: April 2004

Abstract

The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

Suggested Citation

Nordhaus, William D., Schumpeterian Profits in the American Economy: Theory and Measurement (April 2004). NBER Working Paper No. w10433. Available at SSRN: https://ssrn.com/abstract=532992

William D. Nordhaus (Contact Author)

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