An OLG Model of Common Ownership: Effects on Consumption and Investments
26 Pages Posted: 26 Sep 2018 Last revised: 22 Aug 2019
Date Written: August 21, 2019
We analyze how an increase in the degree of common ownership of firms in the same market affects consumption and investment. Such an increase is shown to reduce real investment and therefore intertemporal consumption. Overall, institutional investors' common ownership of firms competing in the same market serves as a device for weakening market competition. The resulting increase in the price of acquiring shares with institutional investors then crowds out savings directed to real investments.
Keywords: Common ownership, institutional investors, real versus financial investments, market power, savings and investments, investment crowding-out, overlapping generations.
JEL Classification: G11, G23, L13, L41
Suggested Citation: Suggested Citation