Double-Counting of Investment
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 over-statement of levels of GDP and national income. Across countries, those with higher propensities to invest artificially look richer gauged by per capita GDP. There is also exaggeration of capital-income shares. An alternative measure involves a form of full expensing of gross investment. In the steady state, revised product and income correspond to consumption. Outside of the steady state, the measure deviates from consumption because full expensing applies to the long-run flow of gross investment.
I have benefited from comments by Alberto Alesina, David Baqaee, Xiang Ding, Emmanuel Farhi, Dale Jorgenson, Loukas Karabarbounis, and Ian Leifer. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Robert J Barro, 2021. "Double Counting of Investment," The Economic Journal, vol 131(638), pages 2333-2356. citation courtesy of