The Rise and Fall of Unproductive Activities in the US Economy 1964–2015: Facts, Theory and Empirical Evidence

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.