Accounting for Rising Corporate Profits : Intangibles or Regulatory

Since 1980, US corporate valuations have risen relative to assets and operating margins have grown. The possibility of sustained economic rents has raised concerns about economic dynamism and inequality. But rising profits could represent growing returns to corporate investments in intangibles instead of returns to political rent seeking. Using new data on Federal regulation and data on lobbying, campaign spending, R&D, and organizational capital, this paper finds that both intangibles and political factors account for a substantial part of the increase in profits, but since 2000 much of the rise in profits is caused by growing political rent seeking.