Discussion paper

DP14200 How the Wealth Was Won: Factor Shares as Market Fundamentals

We provide novel evidence on the driving forces
behind the sharp increase in equity values over the post-war era. From the
beginning of 1989 to the end of 2017, 23 trillion dollars of real equity
wealth was created by the nonfinancial corporate sector. We estimate that
54% of this increase was attributable to a reallocation of rents to
shareholders in a decelerating economy. Economic growth accounts for just
24%, followed by lower interest rates (11%) and a lower risk premium
(11%). From 1952 to 1988 less than half as much wealth was created, but
economic growth accounted for 92% of it.


Greenwald, D, M Lettau and S Ludvigson (2019), ‘DP14200 How the Wealth Was Won: Factor Shares as Market Fundamentals‘, CEPR Discussion Paper No. 14200. CEPR Press, Paris & London. https://cepr.org/publications/dp14200