Conditions for Sustainable Optimal Economic Development
AbstractThis paper shows that, for dynamic optimizing economies with different types of natural resource, environmental, and human-made capital stocks, a necessary and sufficient condition for permanently sustaining an optimal utility/consumption level is the stationarity of the current-value Hamiltonian. For economies whose development is not exogenously and directly affected by time (i.e., time-autonomous economies), this stationarity condition generalizes Dixit et al.'s (1980 ) "zero-net-aggregate-investment" rule of sustain-ability, which in turn generalizes Solow-Hartwick's sustainability rule. For non-autonomous economies, the stationarity condition is not generally fulfilled, and the current-value Hamiltonian under (over) estimates the true welfare level by an amount equal to the discounted value of the net "pure time effect." For the non-autonomous case of a time-dependent utility discount rate, a general condition on the discount rate function (of which the hyperbolic discount rate function is a special case) upholds the results obtained for autonomous cases. The paper concludes with a discussion of policies that promote both optimality and sustainability objectives. Copyright � 2006 The Author; Journal compilation � 2006 Blackwell Publishing Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Development Economics.
Volume (Year): 10 (2006)
Issue (Month): 3 (08)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Y. Hossein Farzin, 2007. "Sustainability and Optimality in Economic Development: Theoretical Insights and Policy Prospects," Working Papers 2007.89, Fondazione Eni Enrico Mattei.
- Laibson, David, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(2), pages 443-77, May.
- Craig Bond & Y. Farzin, 2008. "Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(3), pages 383-399, July.
- Cairns, Robert D., 2008. "Value and income," Ecological Economics, Elsevier, vol. 66(2-3), pages 417-424, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.