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Capital Accumulation and Resource Depletion: A Hartwick Rule Counterfactual

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  • Kirk Hamilton
  • Giovanni Ruta
  • Liaila Tajibaeva

Abstract

How much produced capital would resource-abundant countries have today if they had actually followed the Hartwick Rule (invest resource rents in other assets) over the last 30 years? We employ time series data on investment and rents on exhaustible resource extraction for 70 countries to answer this question. The results are striking: Venezuela, Trinidad and Tobago, and Gabon would all have as much produced capital as South Korea, while Nigeria would have five times its current level. A specific rule for sustainability – maintain positive constant genuine investment – is shown to lead to unbounded consumption. Copyright Springer 2006

Suggested Citation

  • Kirk Hamilton & Giovanni Ruta & Liaila Tajibaeva, 2006. "Capital Accumulation and Resource Depletion: A Hartwick Rule Counterfactual," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 517-533, August.
    • Handle: RePEc:kap:enreec:v:34:y:2006:i:4:p:517-533
    DOI: 10.1007/s10640-006-0011-2
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    5. Geir Asheim & Wolfgang Buchholz & Cees Withagen, 2003. "The Hartwick Rule: Myths and Facts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 129-150, June.
    6. Kirk Hamilton & John Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 615-621, May.
    7. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
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    11. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Hartwick rule; exhaustible resources; sustainable development; Q01; Q32; Q56;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • 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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