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Is an Exhaustible Resource Economy Sustainable?

  • Y. Hossein Farzin

The paper focuses on two alternative concepts of sustainability dominating the literature: (i) maximum permanently maintainable consumption level (Fisherian income) and (ii) the amount of consumption that leaves total value of wealth intact (Hicksian income). In the context of a pure exhaustible resource economy, the author derives an explicit relationship between the two sustainability criteria and shows that while such an economy is not sustainable in the former sense, it is in the latter sense provided social preferences are represented by a logarithmic utility function. The implications of the two concepts for greening of national income are derived. Finally, the paper shows the range of values of the parameters of the model for which the utilitarian optimal path can be close to paths satisfying the alternative sustainability criteria, suggesting that such outcomes are less likely for very poor resource-dependent countries than for the rich ones. Copyright Blackwell Publishing Ltd 2004.

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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 8 (2004)
Issue (Month): 1 (02)
Pages: 33-46

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Handle: RePEc:bla:rdevec:v:8:y:2004:i:1:p:33-46
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