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Maximin-optimal sustainable growth with nonrenewable resource and externalities

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  • Andrei V. Bazhanov

Abstract

I offer an approach linking a welfare criterion to the “sustainable development opportunities” of the economy. This implies a dependence of a criterion on the information about the current state. I consider the problem for the Dasgupta-Heal-Solow-Stiglitz model with externalities. The economy-linked criterion is constructed on an example of the maximin principle applied to a hybrid level-growth measure. This measure includes as special cases the conventional measures of consumption level and percent change as a measure of growth. The hybrid measure or geometrically weighted percent can be used for measuring sustainable growth as an alternative to percent. The closed form solutions are obtained for the optimal paths including the paths, dynamically consistent with the updates in reserve estimates.

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Bibliographic Info

Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2008_11.

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Length: 44 pages
Date of creation: 21 Oct 2008
Date of revision:
Handle: RePEc:eei:rpaper:eeri_rp_2008_11

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Keywords: Essential nonrenewable resource; modified Hotelling Rule; economy-linked criterion; geometrically weighted percent; normative resource peak.;

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References

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  1. Kenneth Stollery, 1998. "Constant Utility Paths and Irreversible Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 730-742, August.
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  11. Leininger, Wolfgang, 1985. "Rawls' Maximin Criterion and Time-Consistency: Further Results," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 505-13, July.
  12. Bazhanov, Andrei, 2008. "Sustainable growth: Compatibility between criterion and the initial state," MPRA Paper 9914, University Library of Munich, Germany.
  13. Bazhanov, Andrei, 2006. "The peak of oil extraction and a modified maximin principle," MPRA Paper 14775, University Library of Munich, Germany, revised 12 Feb 2007.
  14. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
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  16. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-79, May.
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  18. James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1188-1239, December.
  19. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  20. Bazhanov, Andrei, 2006. "Decreasing of Oil Extraction: Consumption behavior along transition paths," MPRA Paper 469, University Library of Munich, Germany.
  21. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-57, December.
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Citations

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Cited by:
  1. Bazhanov, Andrei & Belyaev, Alexander, 2009. "Адекватность Закрытой Модели Для Российской Экономики В Задаче Сравнительного Анализа Энергетической Стра�," MPRA Paper 15109, University Library of Munich, Germany.
  2. Andrei V. Bazhanov, 2009. "A constant-utility criterion linked to an imperfect economy affected by irreversible global warming," EERI Research Paper Series EERI_RP_2009_03, Economics and Econometrics Research Institute (EERI), Brussels.

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