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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 National Saving and Economic Performance, ed. B.D.Bernheim and, J. Shoven. Chicago: The University of Chicago Press, 1991. pp.15-44.
Handle: RePEc:nbr:nberwo:2906

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  1. Alan J. Auerbach, 1980. "Wealth Maximization and the Cost of Capital," NBER Working Papers 0254, National Bureau of Economic Research, Inc.
  2. James M. Poterba, 1987. "Tax Policy and Corporate Saving," Working papers 470, Massachusetts Institute of Technology (MIT), Department of Economics.
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  6. Eisner, Robert, 1989. "Divergences of Measurement and Theory and Some Implications for Economic Policy," American Economic Review, American Economic Association, vol. 79(1), pages 1-13, March.
  7. Lawrence Summers & Chris Carroll, 1987. "Why Is U.S. National Saving So Low?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(2), pages 607-642.
  8. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 33-68 National Bureau of Economic Research, Inc.
  9. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
  10. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  11. John Y. Campbell, 1986. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," NBER Working Papers 1805, National Bureau of Economic Research, Inc.
  12. Jeremy I. Bulow & Lawrence H. Summers, 1982. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc.
  13. Lawrence H. Summers, 1983. "Observations on the Indexation of Old Age Pensions," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 231-258 National Bureau of Economic Research, Inc.
  14. Robert A. Pollack, 1975. "The Intertemporal Cost of Living Index," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 1, pages 179-198 National Bureau of Economic Research, Inc.
  15. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
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  17. Ben S. Bernanke & John Y. Campbell, 1988. "Is There a Corporate Debt Crisis?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 83-140.
  18. Murray Brown, 1980. "The Measurement of Capital Aggregates: A Postreswitching Problem," NBER Chapters, in: The Measurement of Capital, pages 377-432 National Bureau of Economic Research, Inc.
  19. Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
  20. Alan S. Blinder & Angus Deaton, 1985. "The Time Series Consumption Function Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 465-521.
  21. William C. Brainard & John B. Shoven & Laurence Weiss, 1980. "The Financial Valuation of the Return to Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(2), pages 453-512.
  22. West, Kenneth D., 1988. "The insensitivity of consumption to news about income," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 17-33, January.
  23. Joe Peek, 1986. "Household wealth composition: the impact of capital gains," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 26-39.
  24. Eisner, Robert & Pieper, Paul J., 1990. "The world's greatest debtor nation?," North American Review of Economics and Finance, Elsevier, vol. 1(1), pages 9-32.
  25. Laurence J. Kotlikoff, 1985. "Taxation and Savings - A Neoclassical Perspective," NBER Working Papers 1302, National Bureau of Economic Research, Inc.
  26. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
  27. Lawrence H. Summers, 1985. "Issues in National Savings Policy," NBER Working Papers 1710, National Bureau of Economic Research, Inc.
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Cited by:
  1. Robert Dekle & Lawrence H. Summers, 1991. "Japan's High Saving Rate Reaffirmed," NBER Working Papers 3690, National Bureau of Economic Research, Inc.
  2. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
  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. David F. Bradford, 1990. "What is National Saving?: Alternative Measures in Historical and International Context," NBER Working Papers 3341, National Bureau of Economic Research, Inc.
  5. Bosworth, Barry & Collins, Susan M., 2010. "Rebalancing the US Economy in a Postcrisis World," ADBI Working Papers 236, Asian Development Bank Institute.
  6. 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.
  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. Depta, Peter & Ravalli, Frank & Harding, Don, 1994. "Extended Measures of Investment and Saving," MPRA Paper 3319, University Library of Munich, Germany.
  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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