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Comparing approaches to valuing sectoral net investments

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  • Wei, Taoyuan

Abstract

In the literature of comprehensive national accounts, national net investments are used to indicate dynamic welfare improvement in an economy. A well-known approach associates national net investments with the shadow value of change in stock of capital assets in an economy. Following this capital stock approach, sectoral net investments can be defined as the shadow value of change in stock of capital assets owned by a sector in an economy. An alternative approach is based on future commodity flows to a sector. This commodity flow approach associates sectoral net investments with the present value of changes in future commodity flows to a sector. In the present paper, I compare these two approaches and prove that they coincide with each other only if the future commodity flows to the sector can be attributed to current stock of capital assets in the sector alone. In empirical studies, commodity flow approach can be a better alternative if the purpose is to estimate the contributions to national net investments of a recipient of future cash flows.

Suggested Citation

  • Wei, Taoyuan, 2013. "Comparing approaches to valuing sectoral net investments," Resource and Energy Economics, Elsevier, vol. 35(3), pages 316-328.
    • Handle: RePEc:eee:resene:v:35:y:2013:i:3:p:316-328
    DOI: 10.1016/j.reseneeco.2013.03.002
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    References listed on IDEAS

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    Cited by:

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    2. Cairns, Robert D., 2018. "Economic Accounting in the Simple Hotelling Model," Resource and Energy Economics, Elsevier, vol. 51(C), pages 18-27.

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    More about this item

    Keywords

    Comprehensive national accounting; Genuine saving; Income; Nonrenewable resource; Sectoral net investments; Sectoral wealth;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D60 - Microeconomics - - Welfare Economics - - - General
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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