A Comparative Analysis of Intertemporal Behavior of Profits: Japan and the United States

This paper first asks whether the working of market forces in Japanese manufacturing industries is unique to them or similar to U.S. counterparts. It is found that autoregressive profit equations for 376 Japanese firms over 1964-82 are on average similar to those for 413 U.S. firms over 1964-80. The paper next asks whether the interindustry pattern of profit adjustments in Japan is related to industry traits in a manner analogous to the United States. In this case, specific national differences between the two countries in the effects of imports, industry growth, and capital intensity on the profit-adjustment process are found.