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Genuine savings with adjustment costs

Author

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  • Yamaguchi, Rintaro
  • Sato, Masayuki
  • Ueta, Kazuhiro

Abstract

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.

Suggested Citation

  • Yamaguchi, Rintaro & Sato, Masayuki & Ueta, Kazuhiro, 2009. "Genuine savings with adjustment costs," MPRA Paper 16347, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16347
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    File URL: https://mpra.ub.uni-muenchen.de/16347/1/MPRA_paper_16347.pdf
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    References listed on IDEAS

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    1. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(4), pages 647-685, December.
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    3. Duczynski, Petr, 2002. "Adjustment costs in a two-capital growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 837-850, May.
    4. World Bank, 2008. "World Development Indicators 2008," World Bank Publications, The World Bank, number 11855.
    5. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany.
    6. Russell W. Cooper & John C. Haltiwanger, 2006. "On the Nature of Capital Adjustment Costs," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 611-633.
    7. Uzawa,Hirofumi, 2009. "Economic Theory and Global Warming," Cambridge Books, Cambridge University Press, number 9780521066594, April.
    8. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
    9. repec:wbk:wbpubs:28241 is not listed on IDEAS
    10. Uzawa, H, 1969. "Time Preference and the Penrose Effect in a Two-Class Model of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 77(4), pages 628-652, Part II, .
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    12. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
    13. Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January.
    14. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321-321.
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    More about this item

    Keywords

    genuine savings; adjustment costs; sustainable development; natural capital;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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