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The Profit-Investment Nexus: Dynamics of Profitability, Capital Formation, and Distribution in Sweden and the UK, 1950-2016

Wulff, Alexander LU (2019) EKHS12 20191
Department of Economic History
Abstract
With the present thesis I aim to explore what accounts for fluctuations in capital formation
and profitability in Sweden and the UK since 1950. Do expectations rule investments
which in turn determine profits, or is it rather profitability that rule expectations and thus
investment behaviour? Applying a finite distributed-lag model on a variety of variables,
profits emerge as a reliable key factor explaining investment behaviour. However, the
UK exhibits a significant double-sided relationship between investments and profits. The
econometrical study is followed by a descriptive analysis of the long-term trends,
decomposing changes in capital accumulation into changes in the investment-profit ratio
(a measure of the utilization of... (More)
With the present thesis I aim to explore what accounts for fluctuations in capital formation
and profitability in Sweden and the UK since 1950. Do expectations rule investments
which in turn determine profits, or is it rather profitability that rule expectations and thus
investment behaviour? Applying a finite distributed-lag model on a variety of variables,
profits emerge as a reliable key factor explaining investment behaviour. However, the
UK exhibits a significant double-sided relationship between investments and profits. The
econometrical study is followed by a descriptive analysis of the long-term trends,
decomposing changes in capital accumulation into changes in the investment-profit ratio
(a measure of the utilization of profits as fund for investments) and the rate of profit
(which in turn can be decomposed into changes in functional income and capitalintensity).
It is argued that the end of the high growth post-war era and the subsequent
productivity stagnation in Sweden was due to the build-up of over-capacity; the attained
cost-competitiveness of Swedish firms effectively reduced transformative pressures on
the economy. While over-capacity also precipitated in the end of the UK’s post-war era,
the high productivity growth of the private sector since the 1990s is argued to be due to
British firms being exposed to continuously forceful competitive pressures. While
distributional struggles were a central feature of the Swedish dynamic, it was marginally
so in the UK. However, distributional struggles became more prevalent in the UK than in
Sweden from the 1980s onward. (Less)
Please use this url to cite or link to this publication:
author
Wulff, Alexander LU
supervisor
organization
course
EKHS12 20191
year
type
H2 - Master's Degree (Two Years)
subject
keywords
profit squeeze, wage moderation, overaccumulation, underconsumption, secular stagnation, productivity slowdown, competition
language
English
id
8985311
date added to LUP
2019-08-22 08:32:12
date last changed
2019-08-22 08:32:12
@misc{8985311,
  abstract     = {{With the present thesis I aim to explore what accounts for fluctuations in capital formation
and profitability in Sweden and the UK since 1950. Do expectations rule investments
which in turn determine profits, or is it rather profitability that rule expectations and thus
investment behaviour? Applying a finite distributed-lag model on a variety of variables,
profits emerge as a reliable key factor explaining investment behaviour. However, the
UK exhibits a significant double-sided relationship between investments and profits. The
econometrical study is followed by a descriptive analysis of the long-term trends,
decomposing changes in capital accumulation into changes in the investment-profit ratio
(a measure of the utilization of profits as fund for investments) and the rate of profit
(which in turn can be decomposed into changes in functional income and capitalintensity).
It is argued that the end of the high growth post-war era and the subsequent
productivity stagnation in Sweden was due to the build-up of over-capacity; the attained
cost-competitiveness of Swedish firms effectively reduced transformative pressures on
the economy. While over-capacity also precipitated in the end of the UK’s post-war era,
the high productivity growth of the private sector since the 1990s is argued to be due to
British firms being exposed to continuously forceful competitive pressures. While
distributional struggles were a central feature of the Swedish dynamic, it was marginally
so in the UK. However, distributional struggles became more prevalent in the UK than in
Sweden from the 1980s onward.}},
  author       = {{Wulff, Alexander}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Profit-Investment Nexus: Dynamics of Profitability, Capital Formation, and Distribution in Sweden and the UK, 1950-2016}},
  year         = {{2019}},
}