This paper presents a historical model of non-financial corporate cash demand. Although 1947-1971 data are used here, in another article the writer has applied the same formulation to earlier years. The main thrust of the argument is that (1) Very large firms have had a different demand-forcash function from other firms. (2) When the business population changes substantially, relative increases or decreases in numbers tend to be greater where entry and exit are easier, among smaller firms. Thus, business structure has changed with business population. (3) Aggregate corporate cash holding is therefore influenced over the long run by changes in corporate population, as well as by changes in aggregate receipts, interest rates, and cyclical factors. Empirical estimates indicate that the sector's postwar holding of cash, relative to receipts, was substantially less than it would have been if the composition of the corporate population had not changed as the number of firms exploded after 1947.

T HIS PAPER PRESENTS a behavioral equation which was developed to explain the long-run (1910-1963) growth of credit. For recent years, the findings of the of Finances show the characteristics of individual borrowers.' What follows is an attempt to use what is known about individual motivation to formulate a long-run hypothesis about how much consumers in the aggregate wish to borrow, given the level of important related aggregate variables, such as income, the number of income-receivers, and individual holdings of liquid assets. In section III, multivariate analysis is used to estimate the relevant parameters. For early years, Goldsmith's and Nugent's data are used. More recent data are taken from the publications of the Federal Reserve Board (especially the Flow of Funds) and the Department of Commerce. The data used, and their sources, are given in table 1. Tobin,2 using cross-sectional data, argued in 1957 that, Other things equal, households with large debts tend to reduce, and households with small or zero debts to increase, their indebtedness. According to these results, there are certain average equilibrium debt levels to which households tend to adjust their debt if their circumstances remain unchanged. The relevant circumstances include a family's liquid asset holdings, income, change in income, and life cycle. It will be assumed here that an equilibrium level of aggregate has similarly been determined by related aggregate variables. The equilibrium level may be thought of as representing consumers' collective aspirations. At any particular moment, institutional factors, such as war-time restrictions or a lengthening of the terms of borrowing, might make it more or less difficult for them to achieve their aspirations, but the equilibrium pattern should show up statistically over the long run.3 The nature of the available data complicates the analysis because consumer credit is measured in a number of different ways. Data on extended during a year (published by the Federal Reserve Board) are available only as far back as 1929, and only for installment debt (which is by far the largest category). Goldsmith has made estimates of outstanding at the end of the year which go back to 19 10,4 and these form the basis for the conclusions drawn here about tendencies for years before 1929. Secondly, the aggregate data cover several categories of borrowing. The most comprehensive include charge accounts and service as well as installment debt and single* The author is a lecturer in Economics at Swarthmore College. She is greatly indebted to two sources of assistance which made possible the study and research underlying the present paper: a Ford Faculty Research Seminar conducted at the University of Pennsylvania by Professor Dorothy Brady in the summer of 1960, and a fellowship granted for 1962-1963 by the Radcliffe Institute for Independent Study. ' These have been very usefully interpreted by J. B. Lansing, E. S. Maynes, and M. Kreinin in Factors Associated with the Use of Credit in Board of Governors of the Federal Reserve System Instalment Credit, Vol. I, Part II (Washington: U.S. Government Printing Office, 1957) 487-520; and by Jerry Miner in Consumer Debt: An Inter-Temporal Cross-Section in I. Friend and R. Jones, eds., Consumption and Saving, Vol. II (University of Pennsylvania, 1960), 400461. 2James Tobin, Consumer Debt and Spending: Some Evidence from Analysis of a Survey in Instalment Credit, Vol. I, Part II, 521-545.