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HOUSEHOLD AND ENTERPRISE SAVING AND CAPITAL FORMATION IN THE UNITED STATES: A MARKET TRANSACTIONS VIEW
Author(s) -
Ruggles Richard
Publication year - 1992
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1992.tb00417.x
Subject(s) - economics , capital formation , gross fixed capital formation , capital (architecture) , consumption (sociology) , national accounts , monetary economics , labour economics , financial capital , macroeconomics , market economy , gross domestic product , human capital , history , social science , archaeology , sociology
Contrary to conventional macro theory, it is not the consumption function in terms of either the permanent income or the life‐cycle theory of saving that has furnished the saving for enterprise capital formation in the United States. Household sector accounts indicate that household gross saving, correctly measured, did not exceed household gross capital formation in the United States over the period since 1947. Furthermore, historical data on enterprise saving and capital formation in the United States, and cross‐section tax return data of U.S. corporations indicate that the gross saving for many enterprise sectors has been equal to or greater than their gross capital formation. There are exceptions, however: these same sources indicate that public utilities have borrowed substantially to finance their capital formation. Finally, it is argued that employer pension and insurance reserves held by financial institutions for future benefit payments represent retained income of a nature similar to undistributed profits, and that these constitute a source of saving in the economy.