Profit rate dynamics in US manufacturing

Profit rate convergence is an important feature of standard theory. However, its evidence base is weak. Its key propositions were tested for US manufacturing, 1985-2016. The findings demonstrate strong evidence of convergence, but weak inter-sectoral capital flows, and no diminishing returns. Considerable dispersion remained even after three decades of strong convergence, and this was symmetrical; macro shocks, such as the financial crisis, had only a transient impact. Four of the existing theories in the literature are found to be compatible with these findings, and a hypothesis is suggested that synthesizes them in a realistic manner.