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Capital Accumulation and Resource Depletion: A Hartwick Rule Counterfactual

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  • Kirk Hamilton

    ()

  • Giovanni Ruta
  • Liaila Tajibaeva

Abstract

How much produced capital would resource-abundant countries have today if they had actually followed the Hartwick Rule (invest resource rents in other assets) over the last 30 years? We employ time series data on investment and rents on exhaustible resource extraction for 70 countries to answer this question. The results are striking: Venezuela, Trinidad and Tobago, and Gabon would all have as much produced capital as South Korea, while Nigeria would have five times its current level. A specific rule for sustainability – maintain positive constant genuine investment – is shown to lead to unbounded consumption. Copyright Springer 2006

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 34 (2006)
Issue (Month): 4 (August)
Pages: 517-533

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Handle: RePEc:kap:enreec:v:34:y:2006:i:4:p:517-533

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Web page: http://www.springerlink.com/link.asp?id=100263

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Keywords: Hartwick rule; exhaustible resources; sustainable development; Q01; Q32; Q56;

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References

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  1. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers, Queen's University, Department of Economics 220, Queen's University, Department of Economics.
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  11. Kirk Hamilton & Cees Withagen, 2007. "Savings growth and the path of utility," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 703-713, May.
  12. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, World Bank Group, vol. 13(2), pages 333-56, May.
  13. Martin L. Weitzman & Karl-Gustaf Lofgren, 1996. "On the Welfare Significance of Green Accounting as Taught by Parable," Harvard Institute of Economic Research Working Papers 1755, Harvard - Institute of Economic Research.
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  19. Lange, Glenn-Marie & Wright, Matthew, 2004. "Sustainable development in mineral economies: the example of Botswana," Environment and Development Economics, Cambridge University Press, vol. 9(04), pages 485-505, August.
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Citations

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Cited by:
  1. Djiofack, Calvin Z. & Omgba, Luc Désiré, 2011. "Oil depletion and development in Cameroon: A critical appraisal of the permanent income hypothesis," Energy Policy, Elsevier, vol. 39(11), pages 7202-7216.
  2. Bazhanov, Andrei V., 2010. "Sustainable growth: Compatibility between a plausible growth criterion and the initial state," Resources Policy, Elsevier, Elsevier, vol. 35(2), pages 116-125, June.
  3. Bazhanov, Andrei V., 2013. "Constant-utility paths in a resource-based economy," Resource and Energy Economics, Elsevier, vol. 35(3), pages 342-355.
  4. Frederick van der Ploeg, 2007. "Genuine Saving and the Voracity Effect," Economics Working Papers ECO2007/38, European University Institute.
  5. Bazhanov, Andrei, 2008. "Inconsistency between a criterion and the initial conditions," MPRA Paper 6792, University Library of Munich, Germany.
  6. Frederick van der Ploeg, 2009. "Rapacious Resource Depletion and Excessive Investment Fuelled by Rival Factions and Insecure Property Rights," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 016, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  7. Massimiliano Mazzanti & Roberto Zoboli, 2012. "A Political Economy Approach to Resource Taxation: Weak Sustainability, Revenue Recycling and Regional Planning," Working Papers 201202, University of Ferrara, Department of Economics.
  8. Bazhanov, Andrei, 2008. "Sustainable growth: The extraction-saving relationship," MPRA Paper 9911, University Library of Munich, Germany.
  9. van der Ploeg, Frederick, 2010. "Why do many resource-rich countries have negative genuine saving?: Anticipation of better times or rapacious rent seeking," Resource and Energy Economics, Elsevier, vol. 32(1), pages 28-44, January.
  10. Frederick Ploeg, 2011. "Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights: A Puzzle," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 48(1), pages 105-128, January.
  11. Bazhanov, Andrei, 2012. "Disregarded inefficiency may dominate sustainability policies," MPRA Paper 43621, University Library of Munich, Germany.
  12. Bazhanov, Andrei, 2008. "Sustainable growth: Compatibility between criterion and the initial state," MPRA Paper 9914, University Library of Munich, Germany.
  13. Bazhanov, Andrei, 2013. "Inefficiency and Sustainability," MPRA Paper 51815, University Library of Munich, Germany.
  14. Bazhanov, Andrei, 2011. "Investment and current utility change in dynamically inefficient economies," MPRA Paper 35487, University Library of Munich, Germany.
  15. John C. V. Pezzey, 2005. "Sustained growth from non-renewable resources: constant absolute genuine savings and constant relative genuine savings compared," Economics and Environment Network Working Papers, Australian National University, Economics and Environment Network 0502, Australian National University, Economics and Environment Network.
  16. Kirk Hamilton & Giles Atkinson, 2013. "Resource Discoveries, Learning and National Income Accounting," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 117, Grantham Research Institute on Climate Change and the Environment.
  17. Hamilton, Kirk & Atkinson, Giles, 2013. "Resource discoveries, learning, and national income accounting," Policy Research Working Paper Series 6505, The World Bank.
  18. Barkhordar, Zahra A. & Saboohi, Yadollah, 2013. "Assessing alternative options for allocating oil revenue in Iran," Energy Policy, Elsevier, vol. 63(C), pages 1207-1216.
  19. Bazhanov, Andrei, 2011. "Investment and resource policy under a modified Hotelling rule," MPRA Paper 32428, University Library of Munich, Germany.
  20. Frederick Van der Ploeg, 2010. "Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights," CESifo Working Paper Series 2981, CESifo Group Munich.
  21. Karolina Ryszka, 2013. "Resource Extraction in a Political Economy Framework," Tinbergen Institute Discussion Papers 13-094/VIII, Tinbergen Institute.
  22. Giorgio Brosio & Raju Jan Singh, 2014. "Revenue Sharing of Natural Resources in Africa : Reflections from a Review of International Practices," World Bank Other Operational Studies 20062, The World Bank.

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