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Optimal Growth, Genuine Savings And Long‐Run Dynamics

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  • Simone Valente

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.

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  • Simone Valente, 2008. "Optimal Growth, Genuine Savings And Long‐Run Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(2), pages 210-226, May.
    • Handle: RePEc:bla:scotjp:v:55:y:2008:i:2:p:210-226
    DOI: 10.1111/j.1467-9485.2008.00451.x
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    References listed on IDEAS

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    1. Corrado Di Maria & Simone Valente, 2006. "The Direction of Technical Change in Capital-Resource Economies," CER-ETH Economics working paper series 06/50, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. Pezzey, J., 1992. "Sustainable Development Concepts; An Economic Analysis," Papers 2, World Bank - The World Bank Environment Paper.
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    Cited by:

    1. Lucas Bretschger & Simone Valente, 2011. "International trade and net investment: theory and evidence," International Economics and Economic Policy, Springer, vol. 8(2), pages 197-224, June.
    2. Sergey M. Aseev, 2023. "Necessary Conditions for the Optimality and Sustainability of Solutions in Infinite-Horizon Optimal Control Problems," Mathematics, MDPI, vol. 11(18), pages 1-15, September.

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