Unequal exchange, profit rate and growth: An empirical estimation

The present study aims to contribute to the literature on unequal exchange by empirically linking unequal exchange, the rate of profit, and growth convergence in a Marxian framework. To this end, a method is proposed that incorporates several contributions from recent empirical literature into a framework based on the combination of Marx’s economics with Leontief’s input-output analysis. The method is applied to data from the World Input–Output Database (2016 version) to estimate the effects of unequal exchange on the rate of surplus-value, the organic composition of capital, the rate of profit and the growth rate, covering 43 countries from 2000 to 2014. The main conclusion of the study is that unequal exchange boosts the rate of profit in the North and constraints profitability in the South, mainly due to the effect on the rate of surplus-value. The main implication of all this is that if the effect of unequal exchange on growth rates were of the same order as the effect on profit rates—as Marxian economics assumes—unequal exchange could explain a good deal of the lack of convergence between rich and poor countries.