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Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value

  • Antoine d’Autume
  • Katheline Schubert

This paper studies the undiscounted utilitarian optimal paths of the canonicalDasgupta-Heal-Solow model when the stock of natural capital is a direct argument ofwell-being, besides consumption. We use a Keynes-Ramsey rule which yields a generalization of Hartwick?s rule : if society has a zero discount rate but is ready to acceptintertemporal substitution, net investment should not be zero as in the maximin casebut should be positive, its level depending on the distance between the current and thelong run bliss level of utility. We characterize solutions in the Cobb-Douglas utility andproduction case, and analyse the influence of the intertemporal elasticity of substitutionon the time profile of the optimal paths. We show that, in the Cobb-Douglas case, theratio of the values of the resource and capital stocks remains constant along the optimal path, and is independent of initial conditions.

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Article provided by Dalloz in its journal Revue d'économie politique.

Volume (Year): 118 (2008)
Issue (Month): 6 ()
Pages: 827-845

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Handle: RePEc:cai:repdal:redp_186_0827
Contact details of provider: Web page: http://www.cairn.info/revue-d-economie-politique.htm

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  1. Mitra, Tapan, 1980. "On Optimal Depletion of Exhaustible Resources: Existence and Characterization Results," Econometrica, Econometric Society, vol. 48(6), pages 1431-50, September.
  2. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  3. Antoine D'Autume & Katheline Schubert, 2008. "Hartwick's rule and maximin paths when the exhaustible resource has an amenity value," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00275765, HAL.
  4. Krautkraemer, Jeffrey A, 1985. "Optimal Growth, Resource Amenities, and the Preservation of Natural Environments," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 153-70, January.
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