In light of recent large revisions to the official measures of
U.S. output, this update reviews the evidence in my 2010 Brookings Paper
showing that the income-side estimate of output (currently called gross domestic
income, or GDI) likely captures business cycle fluctuations in true output
better than its better-known expenditure-side counterpart (called gross domestic
product, or GDP). Most notably, over the 2007–09 downturn, the revisions
moved the expenditure-side estimates closer to the income-side estimates,
which showed that the downturn was considerably worse than reported initially
by the expenditure-side estimates. The tendency for the expenditure-side
estimates to be revised toward the income-side estimates is clearer now, as is a
tendency for the smoothed income-side estimates to be revised away from the
smoothed expenditure-side estimates.
