PROFITABILITY AND GROWTH IN MULTIREGION SYSTEMS - PROLOGUE TO A HISTORICAL GEOGRAPHY

Consider the OECD, and divide it into two regions: Japan and the rest. How have rates of profit, the history of capital accumulation and the growth of demand and supply, interregional investment and trade inter acted to produce their historical geography? What can we learn from th at data about theories of profit, growth, and interregional competitio n? In this paper, I estimate the parameters of a disequilibrium, dynam ic, interregional model that illuminates these questions, paying parti cular attention to the manner in which investment is generated and flo ws between regions. I find a complex relationship between productivity and costs, profitability and accumulation. These variables are not we ll correlated over space. The evidence prompts questions about the wei ght that is given to profitability in interpreting the growth of regio ns. More important are the availability of funds (generated by the exi sting capital stock), the production intentions of corporations, and t he investment policies of financiers. Likewise, over time profitabilit y and accumulation are correlated, but this correlation is strong only in the long run; in the short run, rates of growth are determined far more by production decisions and investment policies than by changes in the rate of profit.