REINVESTED EARNINGS IN THE NATIONAL ACCOUNTS

Esben Dalgaard, Christoffer Eff and Annette Thomsen

Review of Income and Wealth, 2000, vol. 46, issue 4, 401-419

Abstract: The paper raises three questions. Firstly, is it warranted that a significant part of primary (property) income is not shown in the national accounts as being distributed to the owners of the assets to which it accrues but ends up as capital gains in the revaluation account? Secondly, why has the SNA chosen not to record reinvested earnings of corporations as flows of property income with the exception of foreign direct investment, and thirdly why the asymmetrical recording of stock investments constituting more than 10 percent of equity capital depending on whether domestic or foreign transactions are concerned? Reinvested earnings on domestic equity investment above 10 percent of a corporation are not recorded as property income in the system. The paper looks at these three questions from the perspective of the analytical uses of national accounts. The consequences for the analysis of income distribution both between nations and within nations are examined.

Date: 2000
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