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The Weitzman Foundation of NNP with Non-Constant Interest Rates


  • Asheim, G.B.


Weitzman shows that capital gains should be excluded from NNP. This result is somewhat deceptive since, with his assumption of a constant interest rate, there are no aggregate capital gains, while capital gains in each open economy should be included fully. Here, the implications of Weitzman welfare foundation is explored in the case of non-constant interest rates, a case often encountered in resource models. It is established that the conventional measure of NNP must be adjusted for capital gains and interest rate effects. This result is of importance for the distribution of NNP between resource rich and resource poor countries. Published in: The Scandinavian Journal of Economics 3, 1997
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Suggested Citation

  • Asheim, G.B., 1995. "The Weitzman Foundation of NNP with Non-Constant Interest Rates," Memorandum 26/1995, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:1995_026

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    References listed on IDEAS

    1. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    2. Bovenberg, A Lans & van der Ploeg, Frederick, 1994. " Green Policies and Public Finance in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(3), pages 343-363.
    3. Strand, Jon, 1998. " Pollution Taxation and Revenue Recycling under Monopoly Unions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 765-780, December.
    4. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 593-610, September.
    5. Bovenberg, A Lans & van der Ploeg, Frederick, 1993. "Green Policies in a Small Open Economy," CEPR Discussion Papers 785, C.E.P.R. Discussion Papers.
    6. Schneider, Kerstin, 1997. " Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 45-49, March.
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    Cited by:

    1. Hartwick, John M & Long, Ngo Van, 1999. "Constant Consumption and the Economic Depreciation of Natural Capital: The Nonautonomous Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 53-62, February.
    2. Withagen, C. A. A. M., 1996. "Sustainability and investment rules," Economics Letters, Elsevier, vol. 53(1), pages 1-6, October.
    3. Weitzman, Martin L., 1998. "On the welfare significance of national product under interest-rate uncertainty," European Economic Review, Elsevier, vol. 42(8), pages 1581-1594, September.

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