NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Double-Counting of Investment

Robert J. Barro

NBER Working Paper No. 25826
Issued in May 2019, Revised in July 2019
NBER Program(s):Economic Fluctuations and Growth

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.

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Document Object Identifier (DOI): 10.3386/w25826

 
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