Genuine Saving and the Voracity Effect
Many resource-rich countries have poor economic performance and suffer from negative genuine saving rates, especially if they have many rival factions and badly functioning legal systems. We attempt to shed light on these stylized facts by analyzing a power struggle about the control of natural resources where competing factions in society have a private stock of financial assets and a common stock of natural resources. We solve a dynamic common-pool problem and obtain political economy variants of the Hotelling rule for resource depletion and the Hartwick saving rule necessary to sustain constant consumption in an economy with exhaustible natural resources. The rate of increase in the price of natural resources and resource depletion are faster than demanded by the Hotelling rule. As a result, the country substitutes away from resources to capital so that it saves and invests more than a homogenous society. The power struggle boosts output. Nevertheless, fractionalization depresses aggregate consumption and social welfare and leads to negative genuine saving if properly corrected for common-pool externalities. Fractionalization induces, however, positive genuine saving as measured by the World Bank.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||May 2008|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- R. M. Solow, 1973.
"Intergenerational Equity and Exhaustable Resources,"
103, Massachusetts Institute of Technology (MIT), Department of Economics.
- R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
- David, Paul A & Wright, Gavin, 1997. "Increasing Returns and the Genesis of American Resource Abundance," Industrial and Corporate Change, Oxford University Press, vol. 6(2), pages 203-45, March.
- Asheim, Geir B. & Weitzman, Martin L., 2001.
"Does NNP growth indicate welfare improvement?,"
Elsevier, vol. 73(2), pages 233-239, November.
- J. A. Sefton & M. R. Weale, 2006. "The Concept of Income in a General Equilibrium," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 219-249.
- Lane, Philip R & Tornell, Aaron, 1996. "Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
- J Sefton & M Weale, 2005. "The Concept of Income in a General Equilibrium," NajEcon Working Paper Reviews 122247000000000844, www.najecon.org.
- Kirk Hamilton & Cees Withagen, 2007. "Savings growth and the path of utility," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 703-713, May.
- Geir B. Asheim, 1986. "Hartwick's Rule in Open Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 19(3), pages 395-402, August.
- Heal, Geoffrey M., 1993.
"The optimal use of exhaustible resources,"
Handbook of Natural Resource and Energy Economics,
in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880
- Kirk Hamilton & John Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 615-621, May.
- Asheim, Geir B., 1996. "Capital gains and net national product in open economies," Journal of Public Economics, Elsevier, vol. 59(3), pages 419-434, March.
- Kirk Hamilton & Giovanni Ruta & Liaila Tajibaeva, 2006.
"Capital Accumulation and Resource Depletion: A Hartwick Rule Counterfactual,"
Environmental & Resource Economics,
Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 517-533, August.
- Hamilton, Kirk & Ruta, Giovanni & Tajibaeva, Liaila, 2005. "Capital accumulation and resources depletion - a Hartwick rule counterfactual," Policy Research Working Paper Series 3480, The World Bank.
- 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.
- Hodler, Roland, 2006.
"The curse of natural resources in fractionalized countries,"
European Economic Review,
Elsevier, vol. 50(6), pages 1367-1386, August.
- Roland Hodler, 2004. "The Curse of Natural Resources in Fractionalized Countries," Diskussionsschriften dp0404, Universitaet Bern, Departement Volkswirtschaft.
- 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.
- Dasgupta, Partha & M Ler, Karl-G Ran, 2000. "Net national product, wealth, and social well-being," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 69-93, February.
- Dasgupta, Swapan & Mitra, Tapan, 1983. "Intergenerational Equity and Efficient Allocation of Exhaustible Resources," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 133-53, February.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6831. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.