MEASURING REAL INVESTMENT:TRENDS IN THE UNITED STATES

AND INTERNATIONAL COMPARISONS

Milka S. KirovaRobert E. Lipsey

Working Paper 6404

NBER WORKING PAPER SERIES

MEASURING REAL INVESTMENT:TRENDS IN THE UNITED STATES

AND INTERNATIONAL COMPARISONS

Milka S. KirovaRobert E. Lipsey

Working Paper 6404http://www.nber.org/papers/w6404

NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue

Cambridge, MA 02138February 1998

The authors thank Bill Dewald for valuable discussions during the work on this article. We also thankPatricia Pollard and Peter Yoo for helpful comments, and Charles Horioka for providing the data onconsumer durables in Japan. Eran Segev and Ewa Wojas provided research assistance. Any opinionsexpressed are those of the authors and not those of the National Bureau of Economic Research.

© 1998 by Milka S. Kirova and Robert E. Lipsey. All rights reserved. Short sections of text, not toexceed two paragraphs, may be quoted without explicit permission provided that full credit, including© notice, is given to the source.Measuring Real Investment: Trends in the United

States and International ComparisonsMilka S. Kirova and Robert E. LipseyNBER Working Paper No. 6404February 1998JEL Nos. C8, E21, E22

ABSTRACT

The standard measures of nominal capital formation show the United States investing a

proportion of GDP much lower than those of other developed countries throughout the last 25 years

and falling further behind over time. In contrast, measures we have calculated in real terms across

countries and over time indicate that US investment ratios have been rising over time and have been

coming closer and closer to those of the other countries.

A broader measure of capital formation more consonant with economic concepts shows the

United States to have been close to the other countries since 1970 and to have been investing an

above average share of total output in the most recent period 1990-1994. Real capital formation per

capita and per worker, even conventionally defined, has been consistently between 15 and 25 percent

higher than in the other countries and broadly defined real capital formation per capita and per worker

has been 30 to 60 percent higher.

Milka S. Kirova Robert E. LipseyDepartment of Economics National Bureau of Economic ResearchSchool of Business and Administration 50 East 42nd Street, 17th FloorSaint Louis University New York, NY 10017-54053674 Lindell Boulevard relqc@cunyvm.cuny.eduSt. Louis, MO 63108