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Financialisation and the ‘supply-side’ face of the investment-profit puzzle

Rabinovich, J. ORCID: 0000-0002-9175-0848 (2021). Financialisation and the ‘supply-side’ face of the investment-profit puzzle. Journal of Post Keynesian Economics, 44(3), pp. 434-462. doi: 10.1080/01603477.2020.1734463


The high level of profits along with low levels of gross physical investment has been characterized as a puzzle in heterodox economics. One of the most extended answers at the firm level is that changes in corporate governance have altered the objectives of the firm toward profits, rather than growth. However, once it is acknowledged that investment becomes the basis upon which companies supply commodities as well as compete with other firms, an ever decreasing rate of investment should not be compatible with permanent high levels of profits. This is what we call the ‘supply-side’ face of the investment-profit puzzle. The article builds on the post-Keynesian theory of the firm and its investment decision and explores different answers already linked to the financialisation literature such as changes brought about by production outsourcing, increased market power, the attack on labor conditions and financial accumulation. Once these solutions are critically assessed, an extension to the theory is proposed in order to show that firm’s profitability has been detaching from its physical investment decisions.

Publication Type: Article
Additional Information: This is an Accepted Manuscript version of the following article, accepted for publication in Journal of Post Keynesian Economics. Joel Rabinovich (2021) Financialisation and the ‘supply-side’ face of the investment-profit puzzle, Journal of Post Keynesian Economics, 44:3, 434-462. It is deposited under the terms of the Creative Commons Attribution-NonCommercial License (, which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords: Profit, Investment, Financialisation, Globalisation, Monopolisation
Subjects: H Social Sciences > HG Finance
J Political Science > JA Political science (General)
Departments: School of Policy & Global Affairs > International Politics
Text - Accepted Version
Available under License Creative Commons Attribution Non-commercial.

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