Alternative profitability measures and tests of the structure-performance relationship

This paper compares the inferences gained when alternatively specifying Census-based price-cost margin and IRS-based accounting rate of return as the dependent variable in conventional structure-performance models. We find important differences between the structure-performance inferences of the alternative specifications of the profit measure. Further, the alternative profit measures are not highly correlated.The authors acknowledge the constructive comments of an anonymous referee.     

The effective tax rate and the pretax rate of return

This paper presents new estimates of the taxes paid on nonfinancial corporate capital, on the pretax rate of return to capital, and on the effective tax rate. The basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century.An explicit analysis indicates that, after adjusting for different aspects of the business cycle, pretax profitability was between one and 1.5 percentage points lower in the 1970s than in the 1960s. The rate of profitability in the 1960s was also about one-half of a percentage point greater than the profitability in the 7 years of the 1950s after the Korean war.Changes in productivity growth, in inflation, in relative unit labor costs, and in other variables are all associated with changes in profitability. None of these variables, however, can explain the differences in profitability between the 1950s, 1960s and 1970s.Looking at broad decade averages, the effective tax rate and the pretax rate of return move in opposite directions, lower pretax profits occuring when the tax rate is high. There thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates.     

Dense families of low-complexity attainable sets of markets

The complexity of the attainable set of utility outcomes of a market (with finitely many traders) is defined as the least number of commodities involved in any market giving the same set. This notion is investigated both for the case of quasiconcave and concave utility functions. It is shown that, in either case, there is a dense collection of attainable sets, each having complexity at most n(n?1)/2.