Economic limits to corporate growth in America
Dam, Robert A.
Henderson, David R.
Hensel, Nayantara D.
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This work explores the relationship between corporate and economic growth within the United States since 1929. The corporate share of GDP climbed from 52.5 percent in 1929 to 59.7 percent in 2005. Depending upon the years included and the method of estimating respective growth rates, this increasing share of GDP accounts for up to 14 percent of real domestic corporate growth. However, the domestic corporate share of GDP can never exceed 100 percent. Subject to numerous assumptions, the models presented here estimate that this source of corporate growth could be exhausted as early as the year 2032. Given the lack of discussion of this issue in the relevant literature, it is unlikely that current stock valuations account for the eventual loss of this source of growth. The actual effect on stock prices of such a slowdown of domestic corporate growth will depend not only on how far into the future such an event occurs, but also on how successful these corporations are at finding new growth opportunities overseas. More research is needed to better model
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