ABSTRACT
This chapter discusses some of the problems of defining and estimating equations which seek to describe or ‘explain’ these broad features of corporate behaviour with respect to profit appropriation, both at the micro- and macro-levels. In some applications, saving is regarded as the primary decision variable, in others, dividends are used. Which variable to regard as dependent is largely a matter of the decision process assumed to underly the theory to be tested, but statistical considerations may also be important. Evidently Tinbergen was the first to introduce dynamic considerations into a dividend or corporate saving function; that is, to consider the econometrically interesting problem of delayed response of one variable (dividends) to the stimulus of a change in another, a phenomenon now popularly known in the literature as distributed lags. Statistical problems aside, choice of dependent variable must ultimately rest on the decision process involved, and a dividend function based on dividend decisions may be different from the savings function.
