The investment-profit nexus in an era of financialisation and globalisation. A profit-centred perspective

By Cédric Durand, Maxime Gueuder

PKES Working Paper 1614

July 2016

During the past decades, the link between profits and domestic investment has weakened in the biggest high-income economies. The present contribution explores this relaxation of the profits-investment nexus through a profit-centred perspective. Focusing on the impact of the origins and uses of profits, we study the investment behaviour of non-financial corporations in relation to their profits at the macro level since 1980, a period marked by financialisation and globalisation. We contrast three competing hypotheses – the Revenge of the Rentiers, the Financial Turn of Accumulation and Globalisation – and test them through a macro panel data analysis for France, Germany, Italy, Japan, the United Kingdom and the United States over the period 1980-2012.

Keywords: profits, investment, financialisation, globalisation, macro panel analysis

JEL classification: E22 F62 G35