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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

Related research

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

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References

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  1. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
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  4. Pritchett, Lant, 2000. "The tyranny of concepts - CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital," Policy Research Working Paper Series 2341, The World Bank.
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  9. Ferreira, Susana & Vincent, Jeffrey R, 2005. "Genuine Savings: Leading Indicator of Sustainable Development?," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 737-54, April.
  10. Weitzman, Martin L. & Lofgren, Karl-Gustaf, 1997. "On the Welfare Significance of Green Accounting as Taught by Parable," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 139-153, February.
  11. Geir B. Asheim & Wolfgang Buchholz, 2004. "A General Approach to Welfare Measurement through National Income Accounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 361-384, 06.
  12. 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.
  13. Kirk Hamilton & John Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 615-621, May.
  14. Mas, Matilde & Perez, Francisco & Uriel, Ezequiel, 2000. "Estimation of the Stock of Capital in Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 103-16, March.
  15. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
  16. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
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  19. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 551-56, April.
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Citations

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Cited by:
  1. 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 0502, Australian National University, Economics and Environment Network.
  2. Bazhanov, Andrei, 2010. "Constant-utility paths in a resource-based economy," MPRA Paper 27619, University Library of Munich, Germany, revised 20 Dec 2010.
  3. van der Ploeg, Frederick, 2008. "Why Do Many Resource-Rich Countries Have Negative Genuine Saving? Anticipation of Better Times or Rapacious Rent Seeking," CEPR Discussion Papers 7021, C.E.P.R. Discussion Papers.
  4. Kirk Hamilton & Giles Atkinson, 2013. "Resource Discoveries, Learning and National Income Accounting," Grantham Research Institute on Climate Change and the Environment Working Papers 117, Grantham Research Institute on Climate Change and the Environment.
  5. Bazhanov, Andrei, 2008. "Sustainable growth: The extraction-saving relationship," MPRA Paper 9911, University Library of Munich, Germany.
  6. Bazhanov, Andrei, 2012. "Disregarded inefficiency may dominate sustainability policies," MPRA Paper 43621, University Library of Munich, Germany.
  7. Frederick van der Ploeg, 2009. "Rapacious Resource Depletion and Excessive Investment Fuelled by Rival Factions and Insecure Property Rights," OxCarre Working Papers 016, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  8. Bazhanov, Andrei V., 2010. "Sustainable growth: Compatibility between a plausible growth criterion and the initial state," Resources Policy, Elsevier, vol. 35(2), pages 116-125, June.
  9. Frederick Van der Ploeg, 2010. "Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights," CESifo Working Paper Series 2981, CESifo Group Munich.
  10. Bazhanov, Andrei, 2008. "Inconsistency between a criterion and the initial conditions," MPRA Paper 6792, University Library of Munich, Germany.
  11. Frederick Ploeg, 2011. "Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights: A Puzzle," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(1), pages 105-128, January.
  12. Bazhanov, Andrei, 2013. "Inefficiency and Sustainability," MPRA Paper 51815, University Library of Munich, Germany.
  13. Karolina Ryszka, 2013. "Resource Extraction in a Political Economy Framework," Tinbergen Institute Discussion Papers 13-094/VIII, Tinbergen Institute.
  14. 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.
  15. Bazhanov, Andrei, 2011. "Investment and resource policy under a modified Hotelling rule," MPRA Paper 32428, University Library of Munich, Germany.
  16. van der Ploeg, Frederick, 2008. "Genuine Saving and the Voracity Effect," CEPR Discussion Papers 6831, C.E.P.R. Discussion Papers.
  17. Bazhanov, Andrei, 2011. "Investment and current utility change in dynamically inefficient economies," MPRA Paper 35487, University Library of Munich, Germany.
  18. 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.
  19. Barkhordar, Zahra A. & Saboohi, Yadollah, 2013. "Assessing alternative options for allocating oil revenue in Iran," Energy Policy, Elsevier, vol. 63(C), pages 1207-1216.
  20. Bazhanov, Andrei, 2008. "Sustainable growth: Compatibility between criterion and the initial state," MPRA Paper 9914, University Library of Munich, Germany.
  21. Hamilton, Kirk & Atkinson, Giles, 2013. "Resource discoveries, learning, and national income accounting," Policy Research Working Paper Series 6505, The World Bank.

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