Technical Change and the Rate of Profit in Classical-Marxian Models of Economic Growth

Abstract

I study the effect of viable technical change on the equilibrium profit rate in Classical-Marxian models of economic growth with alternative labor market closures. Capitalists adopt a new technique of production only if it is expected to increase the profit rate at the existing real wage rate. I consider three alternative closures: (a) constant real wage rate (labor surplus economy), (b) constant wage share (advanced capitalist economy with strong labor), and (c) constant unemployment rate (advanced capitalist economy with weak labor). I show that the equilibrium profit rate can unambiguously fall after viable capital-using, labor-saving (CU-LS) technical for an advanced economy with strong labor.

JEL Classification: B51, C02

Keywords

economic growth technical change falling rate of profit

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