Genuine savings with adjustment costs
In this paper, we consider how genuine savings would be altered if the adjustment costs of capitals are taken into account in the stylized capitalresource model. It is shown that, in order to derive the modified genuine savings, through shadow prices, the original genuine savings have to be divided by the marginal adjustment costs of the capital in question. This implies that economies with volatile savings harbor hidden costs even if they are judged as sustainable by conventional genuine savings indicators.
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