Comparing Approaches to Valuing Sectoral Net Investments

21 Pages Posted: 22 May 2009 Last revised: 27 Apr 2013

See all articles by Taoyuan Wei

Taoyuan Wei

Center for International Climate and Environmental Research (CICERO)

Date Written: September 6, 2012

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.

Keywords: comprehensive national accounting, genuine saving, income, non-renewable resource, sectoral net investments, sectoral wealth

JEL Classification: C43, D60, Q01, Q56

Suggested Citation

Wei, Taoyuan, Comparing Approaches to Valuing Sectoral Net Investments (September 6, 2012). Resource and Energy Economics, Vol. 35, No. 3, 2013, pp. 316–328, Available at SSRN: https://ssrn.com/abstract=1407016 or http://dx.doi.org/10.2139/ssrn.1407016

Taoyuan Wei (Contact Author)

Center for International Climate and Environmental Research (CICERO) ( email )

P.O. Box 1129 Blindern
Oslo, 0317
Norway

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