An OLG Model of Common Ownership: Effects on Consumption and Investments

26 Pages Posted: 26 Sep 2018 Last revised: 22 Aug 2019

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

Hanken School of Economics

Date Written: August 21, 2019

Abstract

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

Shy, Oz and Stenbacka, Rune, An OLG Model of Common Ownership: Effects on Consumption and Investments (August 21, 2019). Available at SSRN: https://ssrn.com/abstract=3243836 or http://dx.doi.org/10.2139/ssrn.3243836

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)

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