Abstract
The general idea about unproductive labor and the activities associated with it is that they tend to expand and by expanding, reduce the investible product and the growth potential of the economy, however, little is known about the determinants of their movement. In this study, we take a closer look at the US unproductive labor and activities in general during the 1964–2015 period. As possible determinants of the movement of unproductive activities, we consider the economy-wide average rate of profit, the real interest rate and the degree of capacity utilization. The Toda Yamamoto causality tests, as well as the ARDL econometric model, lend support to the view that the unproductive expenditures and activities are determined by rather than determine the above variables. Furthermore, the error correction term indicates that a long run equilibrium relationship exists, and it is attainable after the passage of not too long a time.
Highlights
The question of unproductive activities and their effect on the growth potential is central to the economic thought and dates back to the Physiocrats, the classical economists and Marx
Both Augmented Dickey-Fuller (ADF) and PP unit root tests fail to reject the null hypothesis at the 5% level of significance for the u and r, ensuring that these variables are non stationary at their levels
The real interest rate's null hypothesis of non-stationarity is not rejected at the 10% significance level, when a constant is introduced for both ADF and PP unit root tests
Summary
The question of unproductive activities and their effect on the growth potential is central to the economic thought and dates back to the Physiocrats, the classical economists and Marx. The latter may grow for a number of reasons including the intensification of competition which forces capitalists to spend progressively higher amounts of their surplus-value in administration, supervision and marketing in the effort to ascertain order within their corporation and maintain, and if possible expand, their market share at the expense of competitors Distribution activities, such as wholesale and retail trade, tend to expand along with real estate and other non-production services, when interest rates are low and borrowing easy and, at the same time, the returns on investment plummet. The classical economists and Marx provide us with important clues as to the selection of these variables, at the same time, we have collected enough empirical evidence from the hitherto research of the USA and other economies It does not require a lot of sophisticated investigation and analysis to figure out the major variables affecting and being affected by the ratio of the unproductive expenditures to gross capital stock. The result was the creation of a number of bubbles which, when they burst, led to a fall in the size of the unproductive activities and, at the same time, to lower profit rates
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
