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Market Value Vs. Financial Accounting Measures of National Saving

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  • David F. Bradford

Abstract

Although National Income and Product Account (NIPA) saving measures, and especially NIPA saving rates, are widely used in both scholarly and journalistic treatments, they are seriously defective as representations of the variables derived from economic analysis, either for measuring economic performance or as elements of the explanation for consumption behavior. The cost-based value of a restricted class of assets recorded in the national income and product accounts is a version of the financial accounting for the tangible assets of a business firm. Economic analysis calls instead for the current asset market value of business enterprises (and their equivalents) as the measure of wealth, and the annual change in that value as the measure of saving. National Balance Sheet data on wealth at asset market value presented in this paper show that NIPA saving measures are not good proxies for market value measures. The picture of recent national saving experience that emerges from market value data is quite different. Various conceptual and data quality issues are discussed.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2906.

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Date of creation: Nov 1993
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Publication status: published as David F. Bradford. "Market Value versus Financial Accounting Measures of National Saving," in B. Douglas Bernheim and John B. Shoven, editors, "National Saving and Economic Performance" University of Chicago Press (1991)
Handle: RePEc:nbr:nberwo:2906

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  1. Summers, Lawrence H, 1986. " Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, vol. 41(3), pages 591-601, July.
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  15. David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
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  20. Robert E. Hall, 1988. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  21. Kenneth D. West, 1988. "The Insensitivity of Consumption to News About Income," NBER Working Papers 2252, National Bureau of Economic Research, Inc.
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Cited by:
  1. Jonathan Skinner & Daniel Feenberg, 1990. "The Impact of the 1986 Tax Reform Act on Personal Saving," NBER Working Papers 3257, National Bureau of Economic Research, Inc.
  2. Bradford, D.F., 1990. "What Is National Saving?: Alternative Measures In Historical And International Context," Papers 54, Princeton, Woodrow Wilson School - Discussion Paper.
  3. David Bradford, . "Consumption Taxes: Some Fundamental Transition Issues," EPRU Working Paper Series 95-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  4. Robert E. Hall, 2000. "The stock market and capital accumulation," Proceedings, Federal Reserve Bank of San Francisco, issue Apr.
  5. Barry Bosworth & Susan M. Collins, 2010. "Rebalancing the US Economy in a Postcrisis World," Trade Working Papers 21877, East Asian Bureau of Economic Research.
  6. Depta, Peter & Ravalli, Frank & Harding, Don, 1994. "Extended Measures of Investment and Saving," MPRA Paper 3319, University Library of Munich, Germany.
  7. Michael Reiter, 1999. "Asset prices and the measurement of wealth and saving," Economics Working Papers 396, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Robert Dekle & Lawrence H. Summers, 1991. "Japan's High Saving Rate Reaffirmed," NBER Working Papers 3690, National Bureau of Economic Research, Inc.
  9. David F. Bradford, 1998. "Transition to and Tax-Rate Flexibility in a Cash-Flow-Type Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 151-172 National Bureau of Economic Research, Inc.

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