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Genuine savings with adjustment costs

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  • Yamaguchi, Rintaro
  • Sato, Masayuki
  • Ueta, Kazuhiro

Abstract

In this paper, we consider how genuine savings would be altered if the adjustment costs of capitals are taken into account in the stylized capitalresource model. It is shown that, in order to derive the modified genuine savings, through shadow prices, the original genuine savings have to be divided by the marginal adjustment costs of the capital in question. This implies that economies with volatile savings harbor hidden costs even if they are judged as sustainable by conventional genuine savings indicators.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16347.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16347

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Keywords: genuine savings; adjustment costs; sustainable development; natural capital;

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  1. Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January.
  2. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 321.
  3. 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.
  4. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 26(4), pages 647-685, December.
  5. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  6. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, Elsevier, vol. 8(2), pages 103-108, October.
  7. Russell W. Cooper & John C. Haltiwanger, 2000. "On the Nature of Capital Adjustment Costs," NBER Working Papers 7925, National Bureau of Economic Research, Inc.
  8. Uzawa,Hirofumi, 2003. "Economic Theory and Global Warming," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521823869.
  9. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany.
  10. Uzawa, H, 1969. "Time Preference and the Penrose Effect in a Two-Class Model of Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 77(4), pages 628-52, Part II, .
  11. Duczynski, Petr, 2002. "Adjustment costs in a two-capital growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 26(5), pages 837-850, May.
  12. World Bank, 2008. "World Development Indicators 2008," World Bank Publications, The World Bank, number 11855, August.
  13. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
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