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China's provincial exhaustible resources rent and produced capital stock—Based on Hartwick's rule

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  • Yu, Yun
  • Lei, Yalin

Abstract

Hartwick's rule, which concerns reinvesting resource rents in manmade capital, together with the concept of dynamic efficiency, dealt with by Hotelling's Rule, imply that locally constant consumption is sustainable. Based on Hartwick's rule, we have a hypothesis: if the 29 provinces in China (except Beijing and Shanghai) had invested their resource rents (from three energy resources: oil, natural gas, and coal; and nine mineral resources: iron, copper, lead, zinc, nickel, tin, antimony, molybdenum, and aluminum) in produced capital stock from 1995 to 2014, then the value of these assets should have grown commensurately over time. Using hypothetical estimates of capital stocks, the capital produced from a postulated series of historical investments, and a perpetual inventory model (PIM), the capital produced from exhaustible resources value reinvestment under Hartwick's rule is estimated. The empirical results prove that China's 29 provinces fare very well under Hartwick's rule from 1995 to 2014, and the results show that the provinces exhibit regional differences that are non-synchronous with local economic growth. Some provinces are striking: Xinjiang, Heilong, Shaanxi, Inner Mongolia, and Tianjin would have higher energy resources rent shares and lower levels of capital accumulation. Based on results, we provide managerial implications and suggestions for enhancing provincial performance under Hartwick's rule.

Suggested Citation

  • Yu, Yun & Lei, Yalin, 2017. "China's provincial exhaustible resources rent and produced capital stock—Based on Hartwick's rule," Resources Policy, Elsevier, vol. 52(C), pages 114-121.
    • Handle: RePEc:eee:jrpoli:v:52:y:2017:i:c:p:114-121
    DOI: 10.1016/j.resourpol.2017.02.003
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