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Testing genuine saving

  • Hamilton, Kirk
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    The World Bank has been publishing estimates of adjusted net or"genuine"saving since 1999. This measure of saving treats depletion of natural resources as a type of economic depreciation. Hamilton uses recent theoretical results relating growth in saving to growth in future consumption to provide a test of genuine saving using historical data. Did measured genuine saving in 1976, for example,"predict"the observed changes in consumption over subsequent decades? The author tests four alternative measures of saving econometrically. The worst measure, in terms of explained variation, is traditional net saving. Genuine saving adjusted to reflect population growth exhibits the worst fit with theory. Both gross saving and genuine saving perform better, with good concordance with theory, while genuine saving exhibits a moderate advantage in terms of goodness of fit.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3577.

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    Date of creation: 01 Apr 2005
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    Handle: RePEc:wbk:wbrwps:3577
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    1. 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.
    2. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
    3. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
    5. Asheim, Geir B. & Weitzman, Martin L., 2001. "Does NNP growth indicate welfare improvement?," Economics Letters, Elsevier, vol. 73(2), pages 233-239, November.
    6. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. World Bank, 2002. "World Development Indicators 2002," World Bank Publications, The World Bank, number 13921, September.
    8. Ferreira, Susana & Vincent, Jeffrey R, 2005. "Genuine Savings: Leading Indicator of Sustainable Development?," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 737-54, April.
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