Is the U.S. A Spendthrift Nation?

50 Pages Posted: 19 Jul 2004 Last revised: 20 Sep 2010

See all articles by Robert E. Lipsey

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Irving B. Kravis

University of Pennsylvania - (Deceased)

Date Written: June 1987

Abstract

The belief that the U.S. is a nation of spendthrifts, unwilling to pro- vide for the future, rests on observations of particular narrow definitions of capital formation, on the use of nominal values that ignore inter- national differences in the relative prices of capital goods, and on concentration on the ratio of capital formation to total output rather than on the amount of capita1 formation per capita. By a broad definition of capital formation, the U.S. has been investing a proportion of its gross output in the last decade and a half that is not far below that of other developed countries, even in nominal terms. In world prices, or real terms, U.S. capital formation was a higher proportion of output than in nominal terms. Real gross capital formation per capita in the U.S., even by a narrow definition of capital formation, was above the average for developed countries. By a broad measure of capital formation, few countries surpassed the U.S. in per capita real capital formation.

Suggested Citation

Lipsey, Robert E. and Kravis, Irving B., Is the U.S. A Spendthrift Nation? (June 1987). NBER Working Paper No. w2274. Available at SSRN: https://ssrn.com/abstract=347051

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

Irving B. Kravis

University of Pennsylvania - (Deceased)

N/A

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