Business Cycle Expansions in the Post-World War II United States Economy

Abstract

A central question about business cycles has always been “Why do they go up and why do they go down?” This article uses a Marxian profit rate analysis to explore the first part of this question, the dynamics of business cycle expansions, using the relatively detailed data available on the post-World War II US economy. Each cyclical expansion is divided into two phases, early expansion and late expansion, determined by the behavior of the profit rate. Early expansion is characterized by a strong recovery in the profit rate, whereas late expansion witnesses the decline of the profit rate after it reaches its peak at the end of the early expansion. We show that the Marxian profit rate is a particularly useful analytical tool to empirically study the dynamics of recoveries and capital accumulation, as well as the fragilities that the same recovery process breeds. JEL Classifications: B51, E32