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Constant Consumption and the Economic Depreciation of Natural Capital: The Non-Autonomous Case

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  • Ngo Van Long
  • John M. Hartwick

Abstract

We investigate economic depreciation of natural capital for cases of non-stationary output prices, technology, and interest rates. For the former two cases (exogenous movements in prices and technology), constant consumption emerges under a strategy of investing to cover off economic depreciation. The interest rate case requires a modified sinking fund strategy.

Suggested Citation

  • Ngo Van Long & John M. Hartwick, 1996. "Constant Consumption and the Economic Depreciation of Natural Capital: The Non-Autonomous Case," CESifo Working Paper Series 114, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_114
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    References listed on IDEAS

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    1. Avinash Dixit & Peter Hammond & Michael Hoel, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Oxford University Press, vol. 47(3), pages 551-556.
    2. Svensson, Lars E O, 1986. " On the Intergenerational Allocation of Natural Resources: Comment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 153-155.
    3. Kemp,M.C. & Van Long, N., 1995. "On the Evaluation of Social Income in a Dynamic Economy: Generalizations," Papers 95/43, New South Wales - School of Economics.
    4. Michel, Philippe, 1982. "On the Transversality Condition in Infinite Horizon Optimal Problems," Econometrica, Econometric Society, vol. 50(4), pages 975-985, July.
    5. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
    6. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586.
    7. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    8. Geir Asheim, 1994. "The Weitzman Foundation of NNP with Non-constant Interest Rates," CESifo Working Paper Series 75, CESifo Group Munich.
    9. Lozada, Gabriel A., 1995. "Resource depletion, national income accounting, and the value of optimal dynamic programs," Resource and Energy Economics, Elsevier, vol. 17(2), pages 137-154, August.
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    Cited by:

    1. Butterfield, David W., 2003. "Resource depletion under uncertainty: implications for mine depreciation, Hartwick's Rule and national accounting," Resource and Energy Economics, Elsevier, vol. 25(3), pages 219-238, August.
    2. Mino, Kazuo, 2004. "On the Generalized Weitzman's Rule," MPRA Paper 16996, University Library of Munich, Germany.
    3. Mino, Kazuo, 2004. "Weitzman's rule with market distortions," Japan and the World Economy, Elsevier, vol. 16(3), pages 307-329, August.
    4. Sinn, Hans-Werner, 1999. "Inflation and Welfare: Comment on Robert Lucas," CEPR Discussion Papers 2111, C.E.P.R. Discussion Papers.
    5. Hartwick, John M. & Van Long, Ngo & Tian, Huilan, 2001. "Deforestation and Development in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 235-251, May.

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