[OPE-L:6510] Competition and equalization of profit rates

Eduardo Maldonado Filho (eduardo@orion.ufrgs.br)
Sun, 26 Apr 1998 12:03:21 -0300

Paul Cockshott asks (re: 22/04/98)

> Do you find that for Brazil the rate of profit of industries is
> statistically independent of their organic composition, or is it
> correlated with the organic composition as it is in the UK and the US?

Paul, I didn’t (and couldn’t because the limitation of the data set)
calculated the industries organic composition. What I have calculated were
the following “market structure variables”:
concentration ratios (CR4 and CR8), a proxy for the economies of scale
(ES), capital requirements (KR), the ratio of fixed to total assets (FK)
and industry demand growth (D*).

The only of these variable for which it is found a significant correlation
with the long-run equilibrium profit rates (at industry level) is FK, but
it is negatively correlated. My conjecture for the reason why that happened
is related with the deep recession of 1981-83. With this recession, those
industries with a high proportion of fixed capital had experienced a sharp
increase in their depreciation allowance costs which could not be
compensated by price increases.

If we accepted that FK is a good proxy for the organic composition, then my
results are in accord with the empirical studies for the UK and the US