Optimal growth, genuine savings and long-run dynamics

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6 Citations (Scopus)

Abstract

Green accounting theories have shown that negative genuine savings at some point in time imply unsustainability. Consequently, recent studies advocate the use of the genuine savings measure for empirical testing: a negative index implies that sustainability be rejected. However, this criterion cannot ascertain sustainability, because positive current genuine savings do not rule out genuine dissaving in the future. This paper derives a one-to-one relationship between the sign of long-run genuine savings and the limiting condition for sustained utility in the capital-resource growth model, assuming technical progress and resource renewability. This result suggests to extend the genuine saving method to include a test of the limiting condition: if this condition is empirically rejected, positive current genuine savings are delivering a false message.
Original languageEnglish
Pages (from-to)210-226
Number of pages17
JournalScottish Journal of Political Economy
Volume55
Issue number2
Early online date28 Mar 2008
DOIs
Publication statusPublished - May 2008

Keywords

  • Genuine saving
  • optimal growth
  • net investments
  • sustainability
  • technological progress

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