The Global Rise of Corporate Saving

Peter Chen, Loukas Karabarbounis and Brent Neiman

No 736, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: The sectoral composition of global saving changed dramatically during the last three decades. Whereas in the early 1980s most of global investment was funded by household saving, nowadays nearly two-thirds of global investment is funded by corporate saving. This shift in the sectoral composition of saving was not accompanied by changes in the sectoral composition of investment, implying an improvement in the corporate net lending position. We characterize the behavior of corporate saving using both national income accounts and firm-level data and clarify its relationship with the global decline in labor share, the accumulation of corporate cash stocks, and the greater propensity for equity buybacks. We develop a general equilibrium model with product and capital market imperfections to explore quantitatively the determination of the flow of funds across sectors. Changes including declines in the real interest rate, the price of investment, and corporate income taxes generate increases in corporate profits and shifts in the supply of sectoral saving that are of similar magnitude to those observed in the data.

Keywords: Corporate saving; Profits; Labor share; Cost of capital (search for similar items in EconPapers)
JEL-codes: E21 E25 G32 G35 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017-01-24
New Economics Papers: this item is included in nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (64)

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Related works:
Journal Article: The global rise of corporate saving (2017)
Working Paper: The Global Rise of Corporate Saving (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:736

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