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Has the Rate of Investment Fallen?

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  • Martin Feldstein

Abstract

Although the ratio of gross fixed nonresidential investment to GNP has decreased very little since the late 1960rs, the corresponding net investment ratio declined by nearly 40 percent between the second half of the 1960's and the second half of the 1970's. Four-fifths of this decline was due to the increased ratio of depreciation to GNP and only one-fifth to the decreased ratio of gross investment to GNP. The increased ratio of depreciation to GNP was in turn due in equal amounts to the higher ratio of capital to GNP and to the higher rate of depreciation. Nearly half of the higher depreciation rate was due to the increased rate of depreciation of equipment and nearly half to the increased share of equipment in the capital stock.

Suggested Citation

  • Martin Feldstein, 1981. "Has the Rate of Investment Fallen?," NBER Working Papers 0679, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0679 Note: EFG
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    1. Ray C. Fair, 1981. "Estimated Effects of Relative Prices on Trade Shares," Cowles Foundation Discussion Papers 597, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:

    1. Michael Perelman, 2006. "The neglect of replacement investment in keynesian economics," Review of Political Economy, Taylor & Francis Journals, vol. 18(4), pages 547-559.

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