Double Counting of Investment

Robert Barro

The Economic Journal, 2021, vol. 131, issue 638, 2333-2356

Abstract: The national-income accounts double-count investment, which enters once when it occurs and again in present value as rental income on added capital. The double counting implies that GDP and national income overstate sustainable consumption. An alternative measure, ‘permanent income’, equals consumption in the steady state but deviates from consumption outside of the steady state because expensing of gross investment applies to the long-run flow, not the current value. The permanent-income perspective substantially affects measured factor-income shares. When computed in relation to permanent income, the US labour-income share has been reasonably stable, in contrast to the declining share based on GDP.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1093/ej/ueab005 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Double-counting of investment (2019)
Working Paper: Double-counting of investment (2019)
Working Paper: Double-Counting of Investment (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:econjl:v:131:y:2021:i:638:p:2333-2356.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Economic Journal is currently edited by Francesco Lippi

More articles in The Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press () and ().