The Value and Performance of U.S. Corporations

value, performance, u.s. corporations

Prospects for Shifting the Phillips Curve through Manpower Policy

macroeconomics,Phillips Curve, Manpower Policy

Cyclical movements along the labor supply function

A consensus in macroeconomics holds that the observed higher-frequency movements in employment and hours of work are movements along a labor-supply function caused by shifts of the labor demand function. Recent theoretical thinking has extended this view to include fluctuations in unemployment, so that macroeconomists can speak coherently of movements along an unemployment function caused by shifts in labor demand.Labor supply ; Wages

The Importance of Lifetime Jobs in the U.S. Economy

Though the U.S. labor market is justly notorious for high turnover and consequent high unemployment, it also provides stable, near-lifetime employment to an important fraction of the labor force. This paper investigates patterns of job duration by age, race, and sex, with the following major conclusions: 1. The typical worker today is holding a job which has lasted or will last about eight years. Over a quarter of all workers are holding jobs which will last twenty years or more. Sixty percent hold jobs which will last five years or more. 2. The jobs held by middle-aged workers with more than ten years of tenure are extremely stable. Over the span of a decade, only twenty to thirty percent come to an end. 3. Among workers aged thirty and above, about forty percent are currently working in jobs which eventually will last twenty years or more. Three-quarters are in jobs which will last five years or more.4. The duration of employment among blacks is just as long as among whites. Even though the jobs held by blacks are worse in almost every other dimension, they are no more unstable than those held by whites. 5. Women's jobs are substantially shorter than men's, on the average. Only about a quarter of all women over the age of thirty are employed in jobs which will last over twenty years, whereas over half of men over thirty are holding these near-lifetime jobs.

Consumption

Macroeconomic research on consumption has been influenced profoundly by rational expectations. First, rational expectations together with the hypothesis of constant expected real interest rates implies that consumption should evolve as a random walk. Much of the research of the past decade has been devoted to testing the random walk hypothesis and to explaining its failure. Three branches of the literature have developed. The first relies on the durability of consumption to explain deviations from the random walk property. The second invokes liquidity constraints which block consumers from the credit market transactions needed to make consumption follow a random walk when income fluctuates up and down. The third branch dispenses with the assumption that expected real interest rates are constant. It attempts to explain deviations from the random walk in terms of intertemporal substitution.

Dynamics of corporate earnings

Earnings are the flow of value created by corporations. I concentrate on the concept called EBITDA-earnings before interest, taxes, depreciation, and amortization. This measure captures the results of the substantive non-financial activities of corporations and corresponds to the rental price of capital multiplied by the quantity of capital. I measure earnings per dollar of capital for all U.S. corporations and at the level of 35 U.S. industries. I develop a competitive benchmark for the level of earnings, which takes account of adjustment costs, taxes, depreciation, and the financial opportunity cost of funds. I find that aggregate corporate earnings track the benchmark reasonably closely, leaving a relatively small unexplained component. Thus evidence of the flow of value gives little help in explaining the large discrepancies found in earlier work in the level of the market value of claims on corporations relative to the replacement cost of the capital stock. However, at the industry level, I find substantial volatility of the unexplained component of earnings.

The Role of Consumption in Economic Fluctuations

Consumption and income tend to move together; the correlation of their first differences is about 0.14. In most accounts, the correlation is attributed to the upward slope of the consumption function. When the publicis better off, they consume more. But in the microeconomic theory of the household, income is a variable chosen by the household. Choosing to workmore, and therefore to consume less time away from work, is a sign of diminished well being.The structural relation between earnings and consumption should have a negative slope.The explanation of the observed positive correlation of consumption and income must rest on shifts of the consumption-income relation, not movements along it. An examination of data for the U.S. in the twentieth century shows that the slope of the consumption-income relation has been approximately zero. Shifts in consumer behavior explain the positive observed correlation; they are an important, but not dominant, source of overall fluctuations in the aggregate economy.

The Stock Market and Capital Accumulation

If firms purchase capital up to the point where there is no further marginal benefit, and the firms' securities are equal in value to the capital, then the market value of securities measures the quantity of capital. I explore the implications of this hypothesis using data from U.S. non-farm, non-financial corporations over the past 50 years. The hypothesis implies that corporations have formed large amounts of intangible capital, especially in the past decade. The resources for expanding capital have come from the output of the existing capital. An endogenous growth model can explain the basic facts about corporate performance, with only a modest increase in the productivity of capital in the 1990s.