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Genuine savings and future well-being in Germany, 1850-2000

  • Blum, Matthias
  • Hanley, Nicholas
  • McLaughlin, Eoin

Genuine Savings (GS), also known as ‘net adjusted savings', is a composite indicator of the sustainability of economic development. Genuine Savings reflects year-on-year changes in the total wealth or capital of a country, including net investment in produced capita, investment in human capital, depletion of natural resources, and damage caused by pollution. A negative Genuine Savings rate suggests that the stock of national wealth is declining and that future utility must be less than current utility, indicating that economic development is non-sustainable (Hamilton and Clemens, 1999). We make use of data over a 150 year period to examine the relationship between Genuine Savings and a number of indicators of well-being over time, and compare the relative changes in human, produced, and components of natural capital over the period. Overall, we find that the magnitude of genuine savings is positively related to changes in future consumption, with some evidence of a cointegrating relationship. However, the relationships between genuine savings and infant mortality or average heights are less clear.

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File URL: http://hdl.handle.net/1893/18205
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Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2013-13.

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Date of creation: Dec 2013
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Handle: RePEc:stl:stledp:2013-13
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Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA

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