Saving or investing for the future? Methodology matters in inclusive wealth accounting

Luke McGrath, Eoin McLaughlin and Nick Hanley

No 2025-06, Accountancy, Economics, and Finance Working Papers from Heriot-Watt University, Department of Accountancy, Economics, and Finance

Abstract: This paper investigates the sensitivity of Genuine Savings (GS), a widely used economic indicator of sustainable development, to methodological choices in practical wealth accounting. Using a sample of 33 countries and two major international datasets (World Bank and AMECO), theoretically equivalent but methodologically distinct savings-based (GS) and investment-based (GI) approaches are compared. The results show that substantial discrepancies can arise between GS and GI estimates, both across and within the datasets. Disparities generally exceed the magnitude of the key environmental adjustments in standard GS calculations and can result in conflicting sustainability signals. We highlight internal savings-investment consistency issues, particularly within the World Bank dataset, and demonstrate that, despite theoretical equivalence, the GS and GI estimates can diverge considerably in practice. Our findings suggest that policymakers using wealth-based indicators should shift focus from a binary interpretation (positive = sustainable, negative = unsustainable) to identifying persistently low savings levels. More broadly, it is important to conduct internal consistency checks for robust empirical assessments of sustainable development.

Keywords: Wealth; Sustainability; Natural Capital; Sustainable Development (search for similar items in EconPapers)
JEL-codes: N10 Q01 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hwuaef:325503

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