Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value
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.
Volume (Year): 118 (2008)
Issue (Month): 6 ()
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- 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)
- d'Autume, Antoine & Schubert, Katheline, 2008. "Hartwick's rule and maximin paths when the exhaustible resource has an amenity value," Journal of Environmental Economics and Management, Elsevier, vol. 56(3), pages 260-274, November.
- Antoine d'Autume & Katheline Schubert, 2008. "Hartwick's rule and maximin paths when the exhaustible resource has an amenity value," Documents de travail du Centre d'Economie de la Sorbonne v08031, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- 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-00308793, HAL.
- John Hartwick, 1976.
"Intergenerational Equity and the Investing of Rents from Exhaustible Resources,"
220, Queen's University, Department of Economics.
- Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
- Mitra, Tapan, 1980. "On Optimal Depletion of Exhaustible Resources: Existence and Characterization Results," Econometrica, Econometric Society, vol. 48(6), pages 1431-50, September.
- 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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