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Genuine dissaving and optimal growth

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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 sustainability be rejected. This criterion is not forward-looking: 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 longrun genuine savings and the limiting sustainability condition in the capital-resource model: if the sum of the rates of resource regeneration and augmentation exceeds (falls short of) the discount rate, long-run genuine savings are positive (negative). Testing this limiting condition allows to reveal whether current genuine savings are delivering a false message.

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  • 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.
    • Handle: RePEc:eth:wpswif:05-38
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    More about this item

    Keywords

    Genuine Saving; Green Accounting; Renewable Resources; Sustainable Development; Technological Progress.;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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