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Profitability and Accumulation

Michael Webber and S.P.H. Foot
Economic Geography
Vol. 64, No. 4 (Oct., 1988), pp. 335-351
Published by: Clark University
DOI: 10.2307/144232
Stable URL: http://www.jstor.org/stable/144232
Page Count: 17
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Profitability and Accumulation
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Abstract

It is common in location theory, regional growth theory, and development theory to assume that differences in rates of accumulation are correlated with differences in rates of profit and then to seek factors that would explain why rates of profit (or unit production costs) differ. This paper argues that this procedure is invalid, for there is evidence that profitability and accumulation are not well correlated. Even in well behaved models, there may be net capital flows towards low profit regions or industries (and some examples demonstrate that such behavior does indeed occur); furthermore, the concept of a profit is not relevant to such enterprises as independent commodity producers, union pension funds, and the state; exports of steel from Brasil are not based on low production costs. With this assumption out of the way, spatial economic theories can become more sensitive to such other factors as class agency.

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