Centralization of capital, fall in the rate of profit and their interactions: New empirical evidence

This paper provides the first empirical investigation of the relationship between two Marxian “laws of tendency”: the tendential fall in the rate of profit (RoP) and the tendency toward the centralization of capital. This analysis is made possible by the recent availability of two global datasets: the RoP index constructed by Basu et al. and a capital centralization measure in terms of network control developed by Brancaccio et al. Using data for 1998–2019, we document a common downward global movement in the RoP and in network control, indicating both falling profitability and increasing capital centralization. Standard regression analysis and Bayesian VAR estimates point to a stable long-run relationship and persistent cross-variable effects, according to which the tendency for the RoP to fall fuels the centralization of capital, and vice versa.