Rates of return on capital across the world: are they converging?
This article estimates levels and identifies trends in the profitability of capital in a broad sample of developed, developing and post-communist transition economies making up over 80% of global output. The underlying distributional and efficiency determinants of profitability are considered in the Marxian analytical framework. For the period of 1995–2007 leading to the Great Recession, our estimates indicate a trend towards convergence of national profit rates largely driven by the convergence of profitability in developing and transition economies. During this period, the level of profit rates in all groups of countries experienced growth with the global capital-weighted rate of profit increasing by approximately 50%. The main contributor to this growth in all groups of countries was the increase in average productivity of capital, measured by output-capital ratio. In developed and transition economies, the increase in profit shares of national income and the decline in the relative price of capital goods also contributed to profitability growth. In the same period for developing countries, profit shares and relative prices were relatively stable.