Value flows from corporations to households through eight different pathways. If you take a dollar of revenue that the average corporation generates, 25 cents of that flows through as labor income: wages, salaries, and other benefits to employees. Seven cents of that dollar goes to capital income, meaning dividends, share buybacks, and interest payments to debtholders. Six cents goes to investment—earnings that are retained to be invested in new productive assets—and four cents to production and corporate taxes. The remaining 58 cents goes to supplier payments, which then result in labor income, capital income, investment, and tax pathways for those supplier companies.
There are three additional pathways. One is consumer surplus, which represents consumers’ willingness to pay higher prices than companies charge them for goods and services. That value is an additional 40 cents per dollar of revenue, so a very substantial contribution to households. Then you have two sets of spillovers beyond the purely economic. Negative spillovers include, for example, carbon emissions, land use, and impact on biodiversity. […] Of course, there are positive spillovers as well, such as productivity gains in the broader economy when a company’s innovations become more widely adopted.
Click to Add the First »