Accounting for Rising Corporate Profits: Intangibles or Regulatory Rents?

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Citation: James E. Bessen (2016/05/11) Accounting for Rising Corporate Profits: Intangibles or Regulatory Rents?.

doi: 10.2139/ssrn.2778641

Download: http://ssrn.com/abstract=2778641

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Summary:

"Corporate valuations relative to the cost of assets (Tobin’s Q) have risen by about 20% since 1970 for firms publicly listed in the US. [...] Operating margins for these firms have also risen since 1990. Margins increased by over 2% in aggregate."

Discussion of measurement of rent seeking, including campaign spending and regulatory size and complexity. Regulation could be in response to increased profits, but instead seems to precede increased profits. Rent seeking seems to account for about half of increased profits, is significant to the overall economy ($2 trillion increase in corporate valuation, $200 billion annual transfer from consumers) and is concentrated in "chemicals, including pharmaceuticals; petroleum refining; transportation equipment; electric, gas, and sanitary utilities; and communications."

Paper does not include financial industry because it reports cost of assets differently.