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Constant-utility paths in a resource-based economy

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  • Bazhanov, Andrei

Abstract

This paper analyzes a social planner's solution in a resource-based economy under a constant-utility criterion. The utility function includes social progress in a multiplicative form. The resulting paths of consumption include the patterns of growth that are conventionally used in the literature. This approach extends conventional link between the utilitarian criterion and the maximin for the cases with finite elasticity of marginal utility. The closed form solutions, derived for the Dasgupta-Heal-Solow-Stiglitz (DHSS) model, include the result of Solow (1974) and Hartwick (1977) as a specific case. The approach is applied to an example of a distorted resource-extracting economy under the requirement for smoothness of the paths with respect to historical data.

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File URL: http://mpra.ub.uni-muenchen.de/27619/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27619.

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Date of creation: 02 Aug 2010
Date of revision: 20 Dec 2010
Handle: RePEc:pra:mprapa:27619

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Keywords: essential nonrenewable resource; sustainable growth; geometrically weighted percent; distorted economy;

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