[OPE-L] Capital accumulation and transfers

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Wed Jan 09 2008 - 08:25:59 EST

In social accounts, a "transfer" is defined as a unilateral disbursement of funds. This means that a transfer by definition does not involve an exchange, and the accounting principle is that a transfer cannot make a net addition to new value. Consequently, transfers are excluded from the calculation of value added.

As I said, an ambiguity on the concept of capital accumulation is that it can imply either a transfer (redistribution) of wealth, or a net addition to wealth, or both in combination. The point here is really that a transfer could result in capital accumulation, although it does not make a net addition to wealth. 

The question you might well ask in that case is, why are e.g. social benefits classed as transfers, while producer's taxes are not regarded as transfers? If you probe this question, you will see that the answer is always reliant on a particular definition of production and exchange. In reality, for accounting purposes, activities are defined as "production" not because they have inputs which are transformed into outputs, but rather because they are considered to "generate income". 


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