Corporate Consumption: A Postscript*

Abstract

Corporate retentions have a well-determined effect on consumers' expenditure, which cannot be explained by an impact of retentions on capital gains and thence on household wealth; on the contrary, increases in retentions are associated with subsequent capital losses. The timing of the relationship between retained profits and expenditure is consistent with direct corporate purchases of on-the-job consumption. Copyright � 2008 The Author.

Contributions in Stock-flow Modeling

“…Pitelis (1987) finds the veil almost intact in the UK, a result rejected by Sumner (2004a). Sumner (2004aSumner ( , 2008 finds strong evidence that retained profits have a significant impact on measured UK consumption. 5.…”

“…Well-known problems of measuring saving and the separate incomes of households and corporations 6 are aggravated by the likelihood of related sectoral measurement errors that cancel out, or become less potent, at the aggregate level. Sumner (2004aSumner ( , 2008 notably finds evidence in support of his theory that official statisticians inadvertently fail to exclude some intermediate purchases by corporations of consumer goods and services from the official UK measure of household final consumption. He maintains this measurement error explains the empirical connection between measured consumers' expenditure and corporate retentions.…”

“…3 One justification for a high level of aggregation rests on the heroic assumption that perspicacious households, as shareholders, 'pierce the corporate veil', adjusting their decisions to offset the saving done on their behalf by corporations. Perhaps surprisingly, this proposition enjoys some empirical support; 4 the most striking finding, not confined to the UK, is that 'corporate retentions have a well-determined impact on measured consumers' expenditure' (Sumner, 2008). The pierced corporate veil rationale for across-sector aggregation has a limited following, however.…”

Resurrecting the U.K. Historic Sector National Accounts

“…, 2000). Sumner (2008) has to test the U.K. corporate veil using unrevised and truncated pre‐ESA95 data because the “adoption of the ESA95 has reduced the series on retentions . .…”

“…According to the United Kingdom's official statistical agency, the Office for National Statistics (ONS), 1 its system of accounts for the household, company, government, and overseas sectors provides "an essential framework of the integrated economic accounts of the nation" (Turnbull, 1993). So it is perhaps surprising that the ONS no longer publishes a full historic sector dataset.…”