An analysis of the factors determining profitability using a classical-Marxian model

This paper uses a methodological framework based on Marxian theory of the profit rate for analyzing factors affecting profitability. By testing a classical-Marxian methodology, we examined the factors that determine profitability in the business sector of Cyprus for the years 2006–2022, including: a period of severe structural crisis and change (2013–2014), a period of recovery (2015–2022) based on the outcomes of the crisis, and a period that we take as a reference (2006–2012) against which changes may be compared. Thus, we demonstrate that the massive decline in labor power value during the crisis years of 2013–2014 and after the pandemic (2021–2022) has been a major factor determining the increase in profitability since 2015, which is still ongoing at present (autumn 2022). In value terms, labor power devaluation is the single most important contributor to the rise in Cyprus' profit rate over the past several years. JEL Classification: B40, B51, E11, E30