The evolution and determinants of corporate profits: an international comparison

This paper compares the trends and determinants of U.S. profits with those of Japan, Germany and Canada in a model of pricing-to-market in the export and domestic markets. We find that (I) all countries exhibit a negative-trended profit share; (ii) pass-through is incomplete for all countries, and exchange rate elasticities are larger in smaller countries; (iii) a currency appreciation hurts U.S. profits and helps Japanese profits via imported inputs channel; (iv) during the 1970s unit production costs lowered profits in all countries. After 1980, cost factors still affected profits except in the U.S. where loss of competitiveness due to lower real import prices depressed profits.Corporate profits