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Economic Perspectives, 12, No. 3, May 1988
Government spending and the "falling rate of profit"

Over the last decade, various authors have noted the apparent "productivity slow-down" in the United States. Specific reference has been made to a "falling rate of profit" or a "profits squeeze" as an indicator of a reduction in the productivity of capital. This paper looks at the recent behavior of the rate of return to private capitaland then considers the extent to which its movements can be explained by public sector capital accumulation as well as the overall level of government expenditures on goods and services.



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