The Rise and Fall of Unproductive Activities in the US Economy 1964–2015: Facts, Theory and Empirical Evidence

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World Review of Political Economy

Volume 10, Issue 2

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The Rise and Fall of Unproductive Activities in the US Economy 1964–2015: Facts, Theory and Empirical Evidence

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Author(s): Lefteris Tsoulfidis , Achilleas Tsimis , Dimitris Paitaridis

Publication date (Print): 1 July 2019

Journal: World Review of Political Economy

Publisher: Pluto Journals

Keywords: unproductive expenditures, rate of profit, great recession, ARDL

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Abstract

The general idea about unproductive labor and the activities associated with it is that they tend to expand and by expanding, reduce the investible product and the growth potential of the economy, however, little is known about the determinants of their movement. In this study, we take a closer look at the US unproductive labor and activities in general during the 1964–2015 period. As possible determinants of the movement of unproductive activities, we consider the economy-wide average rate of profit, the real interest rate and the degree of capacity utilization. The Toda Yamamoto causality tests, as well as the ARDL econometric model, lend support to the view that the unproductive expenditures and activities are determined by rather than determine the above variables. Furthermore, the error correction term indicates that a long run equilibrium relationship exists, and it is attainable after the passage of not too long a time.

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Author and article information

Journal

Journal ID (doi): 10.2307/j50005553

Journal ID (jcode): worlrevipoliecon

Title: World Review of Political Economy

Publisher: Pluto Journals

ISSN: 2042-891X

ISSN: 2042-8928

Publication date (Print): 1 July 2019

Volume: 10

Issue: 2 ( doiID: 10.13169/worlrevipoliecon.10.issue-2 )

Pages: 142-170

Article

Publisher ID: worlrevipoliecon.10.2.0142

DOI: 10.13169/worlrevipoliecon.10.2.0142

SO-VID: a008a220-9760-43ca-8d13-a5175084c5ed

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ScienceOpen disciplines: Political economics

Keywords: ARDL,great recession,rate of profit,unproductive expenditures

References

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Baran, A. P., and P. A. Sweezy. 1966. Monopoly Capital: An Essay on the American Economic and Social Order. New York: Monthly Review Press.
Baumol, W. 1967. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” American Economic Review 57 (3): 415–426.
Brown, R. L., J. Durbin, and J. M. Evans. 1975. “Techniques for Testing the Constancy of Regression Relationships over Time.” Journal of the Royal Statistical Society 37 (2): 149–192.
Dickey, D. A., and W. A. Fuller. 1979. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74 (366): 427–431.
Enders, W. 2014. Applied Econometric Time Series. 4th ed. New York: Wiley.
Gillman, J. M. 1958. The Falling Rate of Profit. New York: Cameron Associates.
Granger, C. W. J. 1969. “Investigating Causal Relations by Econometric Models and Cross Spectral Methods.” Econometrica 37 (3): 424–438.
Granger, C. W. J. 1988. “Some Recent Developments in Granger Causality.” Journal of Econometrics 39 (1–2): 199–211.
Gujarati, D. N. 2006. Essentials of Econometrics. 3rd ed. New York: McGraw Hill.
Harris, R., and R. Sollis. 2003. Applied Time Series Modeling and Forecasting. New York: John Wiley.
Kwiatkowski, D., P. Phillips, C. B. Schmidt, and Y. Shin 1992. “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root” Journal of Econometrics 54: 159–178.
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Marx, K. (1867) 1968. Capital I. Moscow: International Publishers.
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Pesaran, M. H., Y. Shin, and J. S. Richard. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships.” Journal of Applied Econometrics 16 (3): 289–326.
Phillips, P. C. B., and P. Perron. 1988. “Testing for a Unit Root in Time Series Regression.” Biometrika 75 (2): 335–346.
Schumpeter, J. 1954. History of Economic Analysis. London: Routledge.
Shaikh, A. 1978. “An Introduction to the History of Crisis Theories.” In US Capitalism in Crisis, edited by Union for Radical Political Economics, 219–241. New York: Monthly Review Press.
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Tsoulfidis, L., and P. Tsaliki. 2014. “Unproductive Labour, Capital Accumulation and Profitability Crisis in the Greek Economy.” International Review of Applied Economics 28 (5): 562–585.
Tullock, G. 1967. “The Welfare Costs of Tariffs, Monopolies and Theft.” Western Economic Journal 5 (3): 224–232.
Vogelsang, T. J., and Perron, P. 1998. “Additional Tests for a Unit Root Allowing for a Break in the Trend at an Unknown Time.” International Economic Review 39: 1073–1100.

Comments

Comment on this article

[1] Bacon, R., and W. Eltis. 1996. Britain's Economic Problem Revisited. London: Macmillan.

[2] Baran, A. P., and P. A. Sweezy. 1966. Monopoly Capital: An Essay on the American Economic and Social Order. New York: Monthly Review Press.

[3] Baumol, W. 1967. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” American Economic Review 57 (3): 415–426.

[4] Brown, R. L., J. Durbin, and J. M. Evans. 1975. “Techniques for Testing the Constancy of Regression Relationships over Time.” Journal of the Royal Statistical Society 37 (2): 149–192.

[5] Dickey, D. A., and W. A. Fuller. 1979. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74 (366): 427–431.

[6] Enders, W. 2014. Applied Econometric Time Series. 4th ed. New York: Wiley.

[7] Gillman, J. M. 1958. The Falling Rate of Profit. New York: Cameron Associates.

[8] Granger, C. W. J. 1969. “Investigating Causal Relations by Econometric Models and Cross Spectral Methods.” Econometrica 37 (3): 424–438.

[9] Granger, C. W. J. 1988. “Some Recent Developments in Granger Causality.” Journal of Econometrics 39 (1–2): 199–211.

[10] Gujarati, D. N. 2006. Essentials of Econometrics. 3rd ed. New York: McGraw Hill.

[11] Harris, R., and R. Sollis. 2003. Applied Time Series Modeling and Forecasting. New York: John Wiley.

[12] Kwiatkowski, D., P. Phillips, C. B. Schmidt, and Y. Shin 1992. “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root” Journal of Econometrics 54: 159–178.

[13] MacKinnon, J. G. 1991. “Critical Values for Cointegration Tests.” In Long-Run Economic Relation, edited by R. F. Engle and C. W. J. Granger, 267–276. Oxford: Oxford University Press.

[14] Mage, S. 1963. “The Law of the Falling Tendency of the Rate of Profit: Its Place in the Marxian Theoretical System and Relevance to the U.S. Economy.” PhD diss., Columbia University.

[15] Marshall, A. (1890) 1920. Principles of Economics. London: Macmillan.

[16] Marx, K. (1867) 1968. Capital I. Moscow: International Publishers.

[17] Mejorado, A., and M. Roman. 2014. Profitability and the Great Recession. New York: Routledge.

[18] Moseley, F. 1991. The Falling Rate of Profit in the Postwar United States Economy. New York: St. Martin's Press.

[19] Narayan, P. K. 2005. “The Saving and Investment Nexus for China: Evidence from Cointegration Tests.” Applied Economics 37 (17): 1979–1990.

[20] Paitaridis, D., and L. Tsoulfidis. 2012. “The Growth of Unproductive Activities, the Rate of Profit, and the Phase-Change of the U.S. Economy.” Review of Radical Political Economics 44 (2): 213–233.

[21] Perron, P. 1994. Unit Root and Structural Change in Macroeconomic Time Series. London: Macmillan.

[22] Perron, P. 1997. “Further Evidence on Breaking Trend Functions in Macroeconomic Variables.” Journal of Econometrics 80 (2): 355–385.

[23] Perron, P., and T. J. Vogelsang. 1993 “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis: Erratum” Econometrica 61(1): 248–249.

[24] Pesaran, M. H., and Y. Shin. 1998. “An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis.” In Centennial Volume of Rangar Frisch, edited by S. Strom and A. Holly, 371–413. Cambridge: Cambridge University Press.

[25] Pesaran, M. H., Y. Shin, and J. S. Richard. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships.” Journal of Applied Econometrics 16 (3): 289–326.

[26] Phillips, P. C. B., and P. Perron. 1988. “Testing for a Unit Root in Time Series Regression.” Biometrika 75 (2): 335–346.

[27] Schumpeter, J. 1954. History of Economic Analysis. London: Routledge.

[28] Shaikh, A. 1978. “An Introduction to the History of Crisis Theories.” In US Capitalism in Crisis, edited by Union for Radical Political Economics, 219–241. New York: Monthly Review Press.

[29] Shaikh, A. 2016. Capitalism: Competition, Conflict, Crises. New York: Oxford University Press.

[30] Shaikh, A., and E. Tonak. 1994. Measuring the Wealth of Nations: The Political Economy of National Accounts. New York: Cambridge University Press.

[31] Smith, A. 1776. The Wealth of Nations. New York: The Modern Library.

[32] Toda, H. Y., and P. C. B. Phillips. 1994. “Vector Autoregression and Causality: A Theoretical Overview and Simulation Study.” Econometric Reviews 13 (2): 259–285.

[33] Toda, H. Y., and T. Yamamoto. 1995. “Statistical Inferences in Vector Autoregressions with Possibly Integrated Processes.” Journal of Econometrics 66 (1–2): 225–250.

[34] Tsoulfidis, L. 2010. Competing Schools of Economic Thought. Heidelberg: Springer.

[35] Tsoulfidis, L., and D. Paitaridis. 2019. “Capital Intensity, Unproductive Activities and the Great Recession of the US Economy.” Cambridge Journal of Economics 43 (3): 623–647. doi. org/10.1093/cje/bey051.

[36] Tsoulfidis, L., and P. Tsaliki. 2014. “Unproductive Labour, Capital Accumulation and Profitability Crisis in the Greek Economy.” International Review of Applied Economics 28 (5): 562–585.

[37] Tullock, G. 1967. “The Welfare Costs of Tariffs, Monopolies and Theft.” Western Economic Journal 5 (3): 224–232.

[38] Vogelsang, T. J., and Perron, P. 1998. “Additional Tests for a Unit Root Allowing for a Break in the Trend at an Unknown Time.” International Economic Review 39: 1073–1100.