Profits and Economic Development

Featuring
Eric Werker
Associate Professor
Harvard Business School

Is what's good for General Motors good for America? In this seminar, Eric Werker will discuss whether high profits, as measured by the mark-up ratio of firms' profits to their costs, are good for growth. Using industry-level data from manufacturing in over 100 countries, Werker and his coauthors find that high mark-ups are a strong negative predictor of growth. The negative effect is strongest in poor countries, suggesting that high profits — possibly due to monopolies in the business environment — stymie economic development rather than enable it.

Download the paper here.