IDEAS home Printed from https://ideas.repec.org/a/kap/iecepo/v8y2011i2p197-224.html
   My bibliography  Save this article

International trade and net investment: theory and evidence

Author

Listed:
  • Lucas Bretschger
  • Simone Valente

Abstract

The theory of welfare accounting shows that comprehensive measures of net investment can be used to test whether an economy is following unsustainable paths of consumption. However, the notion of net investment used in most applied studies rules out technological progress and terms-of-trade gains from international trade. This paper considers an augmented expression of net investment derived from a dynamic growth model featuring international trade in different types of resource inputs, exogenous productivity growth in final sectors, and cost-reducing progress in resource extraction. Calculating augmented net investment for the world's top twenty oil producers, we show that the difference with standard non-augmented measures can be large and may even revert some established con- clusions regarding sustainability: prospects are more favorable than previously thought in oil-exporting countries endowed with large reserves like Angola, Azerbaijan, Kuwait, Saudi Arabia and Venezuela. In oil-importing economies, future consumption possibilities are limited by the lack of expected rental incomes from future resource exports.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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.
    • Handle: RePEc:kap:iecepo:v:8:y:2011:i:2:p:197-224
    DOI: 10.1007/s10368-011-0192-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10368-011-0192-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10368-011-0192-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Avinash Dixit & Peter Hammond & Michael Hoel, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 551-556.
    2. repec:bla:scandj:v:88:y:1986:i:1:p:153-55 is not listed on IDEAS
    3. 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.
    4. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
    5. Bretschger, L. & Smulders, J.A., 2003. "Sustainability and Substitution of Exhaustible Natural Resources : How Resource Prices Affect Long-Term R&D Investments," Other publications TiSEM 2ae844f6-5ea5-45d4-963d-1, Tilburg University, School of Economics and Management.
    6. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 386-411, July.
    7. Heal, Geoffrey & Kristrom, Bengt, 2005. "National income and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 22, pages 1147-1217, Elsevier.
    8. Kenneth J. Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "The genuine savings criterion and the value of population," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 217-225, March.
    9. Pezzey, J.C.V.John C. V., 2004. "One-sided sustainability tests with amenities, and changes in technology, trade and population," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 613-631, July.
    10. Pezzey, J., 1992. "Sustainable Development Concepts; An Economic Analysis," Papers 2, World Bank - The World Bank Environment Paper.
    11. repec:bla:scandj:v:96:y:1994:i:2:p:257-65 is not listed on IDEAS
    12. 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.
    13. Di Maria, Corrado & Valente, Simone, 2008. "Hicks meets Hotelling: the direction of technical change in capital–resource economies," Environment and Development Economics, Cambridge University Press, vol. 13(6), pages 691-717, December.
    14. Vincent, Jeffery & Panayotou, Theodore & Hartwick, John, 1997. "Resource Depletion And Sustainability In Small Open Economies," Harvard Institute for International Development (HIID) Papers 294389, Harvard University, Kennedy School of Government.
    15. Hartwick, John M., 1990. "Natural resources, national accounting and economic depreciation," Journal of Public Economics, Elsevier, vol. 43(3), pages 291-304, December.
    16. World Bank, 2011. "World Development Indicators 2011," World Bank Publications - Books, The World Bank Group, number 2315.
    17. 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.
    18. Asheim, Geir B. & Weitzman, Martin L., 2001. "Does NNP growth indicate welfare improvement?," Economics Letters, Elsevier, vol. 73(2), pages 233-239, November.
    19. repec:bla:scandj:v:88:y:1986:i:1:p:141-49 is not listed on IDEAS
    20. Vellinga, Nico & Withagen, Cees, 1996. "On the Concept of Green National Income," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 499-514, October.
    21. Heal, Geoffrey & Kristrom, Bengt, 2008. "A note on national income in a dynamic economy," Economics Letters, Elsevier, vol. 98(1), pages 2-8, January.
    22. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
    23. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
    24. Sefton, J. A. & Weale, M. R., 1996. "The net national product and exhaustible resources: The effects of foreign trade," Journal of Public Economics, Elsevier, vol. 61(1), pages 21-47, July.
    25. Martin L. Weitzman, 1997. "Sustainability and Technical Progress," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 1-13, March.
    26. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    27. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    28. Schulze, William D., 1974. "The optimal use of non-renewable resources: The theory of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 53-73, May.
    29. Lucas Bretschger & Sjak Smulders, 2007. "Sustainable Resource Use and Economic Dynamics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 1-13, January.
    30. repec:reg:rpubli:132 is not listed on IDEAS
    31. repec:nsr:niesrd:73 is not listed on IDEAS
    32. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
    33. repec:bla:scandj:v:88:y:1986:i:1:p:151-52 is not listed on IDEAS
    34. Geir Asheim, 2004. "Green national accounting with a changing population," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(3), pages 601-619, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lucas Bretschger & Simone Valente, 2011. "International economics and natural resources: from theory to policy," International Economics and Economic Policy, Springer, vol. 8(2), pages 115-120, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Geir B. Asheim, 2003. "Green national accounting for welfare and sustainability:A Taxonomy Of Assumptions And Results," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(2), pages 113-130, May.
    2. Nick Hanley & Louis Dupuy & Eoin McLaughlin, 2015. "Genuine Savings And Sustainability," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 779-806, September.
    3. Pezzey, J.C.V.John C. V., 2004. "One-sided sustainability tests with amenities, and changes in technology, trade and population," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 613-631, July.
    4. John C. V. Pezzey, 2002. "One-sided Unsustainability Tests and NNP Measurement with Multiple Consumption Goods," Economics and Environment Network Working Papers 0208, Australian National University, Economics and Environment Network.
    5. Geir B. Asheim & Rintaro Yamaguchi, 2023. "Comprehensive National Accounting for Carbon Emissions," CESifo Working Paper Series 10562, CESifo.
    6. John C. V. Pezzey, 2002. "A One-sided Sustainability Test With Multiple Consumption Goods," Working Papers in Ecological Economics 0201, Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program.
    7. Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January.
    8. Geir B. Asheim & Wolfgang Buchholz, 2004. "A General Approach to Welfare Measurement through National Income Accounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 361-384, June.
    9. Asheim, Geir B., 2000. "Green national accounting: why and how?," Environment and Development Economics, Cambridge University Press, vol. 5(1), pages 25-48, February.
    10. Adrian Boos, 2015. "Genuine Savings as an Indicator for “Weak” Sustainability: Critical Survey and Possible Ways forward in Practical Measuring," Sustainability, MDPI, vol. 7(4), pages 1-37, April.
    11. Toman, Michael & Pezzey, John C., 2002. "The Economics of Sustainability: A Review of Journal Articles," RFF Working Paper Series dp-02-03, Resources for the Future.
    12. van der Ploeg, Frederick, 2010. "Why do many resource-rich countries have negative genuine saving?: Anticipation of better times or rapacious rent seeking," Resource and Energy Economics, Elsevier, vol. 32(1), pages 28-44, January.
    13. Rubio, M. del Mar, 2004. "The capital gains from trade are not enough: evidence from the environmental accounts of Venezuela and Mexico," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1175-1191, November.
    14. Simone Valente, 2005. "Genuine dissaving and optimal growth," CER-ETH Economics working paper series 05/38, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    15. John C. V. Pezzey, 2004. "Sustainability Policy and Environmental Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 339-359, June.
    16. Asheim, Geir B. & Hartwick, John M. & Mitra, Tapan, 2021. "Investment rules and time invariance under population growth," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    17. Pezzey, John C.V., 2024. "Adjusted net savings needs further adjusting: Reassessing human and resource factors in sustainability measurement," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    18. Koji Tokimatsu & Rintaro Yamaguchi & Masayuki Sato & Rieko Yasuoka & Masahiro Nishio & Kazuhiro Ueta, 2011. "Measuring future dynamics of genuine saving with changes of population and technology: application of an integrated assessment model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 13(4), pages 703-725, August.
    19. Eugenio Figueroa B. & Enrique Calfucura T., 2002. "Depreciación del Capital Natural, Ingreso y Crecimiento Sostenible: Lecciones de la Experiencia Chilena," Working Papers Central Bank of Chile 138, Central Bank of Chile.
    20. Partha Dasgupta & Karl-Goran Maler, 1998. "Decentralization Schemes, Cost-Benefit-Analysis, and Net National Product as a Measure of Social Well-Being," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 12, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

    More about this item

    Keywords

    International trade; Natural resources; Net investment; Sustainability; Technological progress; E22; F11; O11;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:8:y:2011:i:2:p:197-224. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.