The Stock Market and Capital Accumulation

Robert Hall ()

No 7180, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

Date: 1999-06
New Economics Papers: this item is included in nep-cfn and nep-fin
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Published as American Economic Review, Vol. 91, no. 5 (December 2001): 1185-1202
Published as Robert E. Hall, 2000. "The stock market and capital accumulation," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.

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Journal Article: The Stock Market and Capital Accumulation (2001)
Journal Article: The stock market and capital accumulation (2000)
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