Investment Rules and Time Invariance under Population Growth

Geir Asheim, John M. Hartwick and Tapan Mitra

No 8513, CESifo Working Paper Series from CESifo

Abstract: We propose an adaptation of Hartwick’s investment rule to models with population growth and show that following Hartwick’s rule is equivalent to a time-invariant real per capita net national product. In the so-called DHSS model of capital accumulation and resource depletion the proposed Hartwick’s rule equates the accumulation of per capita capital, net of the capital dilution effect of population growth, to the value of the depletion of the resource, gross of the capital dilution effect. We investigate why this asymmetry arises by analyzing a general model with multiple capital goods, in which we obtain a formulation of Hartwick’s investment rule where capital gains play a role if population growth is positive. Since capital gains accrue only to the resource but not to capital, we get the apparent asymmetry in the DHSS model. In both models we obtain as a corollary that keeping the value of net investments equal to zero leads to constant consumption if population is constant.

Keywords: sustainable development; population growth; intergenerational equity (search for similar items in EconPapers)
JEL-codes: D63 O41 Q01 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-env and nep-gro
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Journal Article: Investment rules and time invariance under population growth (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8513

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