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Capital accumulation and resources depletion - a Hartwick rule counterfactual

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  • Hamilton, Kirk
  • Ruta, Giovanni
  • Tajibaeva, Liaila

Abstract

How rich would resource-abundant countries be if they had actually followed the Hartwick Rule (invest resource rents in other assets) over the past 30 years? The authors use time series data on investments and rents onexhaustible resource extraction for 70 countries to answer this question. The results are striking: Gabon, Trinidad and Tobago, and Venezuela would all be as wealthy as the Republic of Korea, while Nigeria would be five times as well off as it is currently. The authors also derive a more general rule for sustainability-maintain positive constant genuine investment-and use this to draw further empirical results.

Suggested Citation

  • Hamilton, Kirk & Ruta, Giovanni & Tajibaeva, Liaila, 2005. "Capital accumulation and resources depletion - a Hartwick rule counterfactual," Policy Research Working Paper Series 3480, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3480
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    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. Lange, Glenn-Marie & Wright, Matthew, 2004. "Sustainable development in mineral economies: the example of Botswana," Environment and Development Economics, Cambridge University Press, vol. 9(4), pages 485-505, August.
    3. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," The World Bank Economic Review, World Bank, vol. 13(2), pages 333-356, May.
    4. Weitzman, Martin L. & Lofgren, Karl-Gustaf, 1997. "On the Welfare Significance of Green Accounting as Taught by Parable," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 139-153, February.
    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.
    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. Ferreira, Susana & Vincent, Jeffrey R, 2005. "Genuine Savings: Leading Indicator of Sustainable Development?," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 737-754, April.
    10. Kirk Hamilton & Cees Withagen, 2007. "Savings growth and the path of utility," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 703-713, May.
    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.
    12. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1978. "On Hartwick’s Rule for Constant Utility and Regular Maximin Paths of Capital Accumulation and Resource Depletion," The Warwick Economics Research Paper Series (TWERPS) 133, University of Warwick, Department of Economics.
    13. 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.
    14. 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.
    15. Pezzey, John C.V., 2004. "Exact measures of income in a hyperbolic economy," Environment and Development Economics, Cambridge University Press, vol. 9(4), pages 473-484, August.
    16. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    17. Kirk Hamilton & John M. Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 615-621, May.
    18. Pritchett, Lant, 2000. "The Tyranny of Concepts: CUDIE (Cumulated, Depreciated, Investment Effort) Is Not Capital," Journal of Economic Growth, Springer, vol. 5(4), pages 361-384, December.
    19. Kirk Hamilton & Katharine Bolt, 2004. "Resource price trends and development prospects," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 85-97, September.
    20. Matilde Mas & Francisco Pérez & Ezequiel Uriel, 2000. "Estimation Of The Stock Of Capital In Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 103-116, March.
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    More about this item

    Keywords

    International Terrorism&Counterterrorism; Economic Theory&Research; Fiscal&Monetary Policy; Capital Markets and Capital Flows; Decentralization; Economic Theory&Research; Environmental Economics&Policies; International Terrorism&Counterterrorism; Economic Growth; Banks&Banking Reform;
    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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