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Sustainability of an economy relying on two reproducible assets

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  • Cairns, Robert D.
  • Del Campo, Stellio
  • Martinet, Vincent

Abstract

The highest utility level that can be sustained in an economy is given by the maximin value. To be able to use this value for sustainability accounting, the corresponding maximin problem must be solved. This paper studies the sustainability of an economy composed of two reproducible assets, each producing one of two consumption goods which are substitutes in utility. We characterize the maximin path of the economy, and associated maximin shadow values. We discuss how these shadow values could be used as accounting prices for development paths that differ from the maximin trajectory. The corresponding genuine savings indicator informs on the improvement or decline of the sustainable level of utility and the prospects of future generations.

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  • Cairns, Robert D. & Del Campo, Stellio & Martinet, Vincent, 2019. "Sustainability of an economy relying on two reproducible assets," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 145-160.
    • Handle: RePEc:eee:dyncon:v:101:y:2019:i:c:p:145-160
    DOI: 10.1016/j.jedc.2019.02.002
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    1. Cairns, Robert D. & Del Campo, Stellio & Martinet, Vincent, 2019. "Sustainability of an economy relying on two reproducible assets," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 145-160.
    2. Cairns, Robert D. & Martinet, Vincent, 2021. "Growth and long-run sustainability," Environment and Development Economics, Cambridge University Press, vol. 26(4), pages 381-402, August.
    3. Carmen Camacho & Hannes Tepper, 2023. "Do this or do that? A model to prioritize reforms," Working Papers halshs-04005785, HAL.
    4. Martinet, Vincent & Del Campo, Stellio & Cairns, Robert D., 2022. "Intragenerational inequality aversion and intergenerational equity," European Economic Review, Elsevier, vol. 144(C).
    5. Carmen Camacho & Hannes Tepper, 2023. "Do this or do that? A model to prioritize reforms," PSE Working Papers halshs-04005785, HAL.

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    More about this item

    Keywords

    Sustainable development; Maximin; Sustainability accounting; Substitutability;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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