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Genuine Saving under Stochastic Growth

Author

Listed:
  • Li, Chuan-Zhong

    (Department of Economics)

  • Löfgren, Karl-Gustaf

    (Department of Economics, Umeå University)

Abstract

The concept of genuine saving appeared for the first time in a proof of a now well known theorem in Weitzman (1976). It was reinvented and used as a local welfare indicator by Pearce and Atkinson (1993). The purpose of this paper is to generalize this welfare measure to a stochastic Brownian motion context. We will use a stochastic version of a growth model introduced by Ramsey (1928). The particular model was developed by Merton (1975). Although the model is simple, it is enough to understand what its welfare results will look like in a general case.

Suggested Citation

  • Li, Chuan-Zhong & Löfgren, Karl-Gustaf, 2009. "Genuine Saving under Stochastic Growth," Umeå Economic Studies 779, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0779
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    References listed on IDEAS

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    1. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," The World Bank Economic Review, World Bank, vol. 13(2), pages 333-356, May.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Trevor W. Swan, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-380, December.
    4. Martin L. Weitzman, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 156-162.
    5. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-380, December.
    6. Robert C. Merton, 1975. "An Asymptotic Theory of Growth Under Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(3), pages 375-393.
    7. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 257-265.
    8. Hamilton, Kirk, 1994. "Green adjustments to GDP," Resources Policy, Elsevier, vol. 20(3), pages 155-168, September.
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    Cited by:

    1. Elettra Agliardi, 2011. "Sustainability in Uncertain Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(1), pages 71-82, January.
    2. Löfgren, Karl-Gustaf, 2011. "On Envelope Theorems in Economics: Inspired by a Revival of a Forgotten Lecture," Umeå Economic Studies 830, Umeå University, Department of Economics.

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    More about this item

    Keywords

    Welfare measures under growth and uncertainty; diversified risk versus undiversified risk;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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