Hartwick's rule and maximin paths when the exhaustible resource has an amenity value

Antoine d'Autume () and Katheline Schubert
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Antoine d'Autume: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This paper studies the maximin paths of the canonical Dasgupta-Heal-Solow model when the stock of natural capital is a direct argument of well-being, besides consumption. Hartwick's rule then appears as an efficient tool to characterize solutions in a variety of settings. We start with the case without technical progress. We obtain an explicit solution of the mmaximin problem in the case where production and utility are Cobb-Douglas. When the utility function is CES with a low elasticity of substitution between consumption and natural capital, we show taht it is optimal to preserve forever a critical level of natural capital, determined endogeneously. We then study how technical progress affects the optimal maximin paths, in the Cobb-Douglas utility case. On the long run path of the economy capital, production and consumption grow at a common constant rate, while the resource stock decreases at a constant rate and is therefore completely depleted in the very long run. A higher amenity value of the resource stock leads to faster economic growth, but to a lower long run rate of depletion. We then develop a complete analysis of the dynamics of the maximin problem when the sole source of well-being is consumption, and provide a numerical resoultion of the model with resource amenity. The economy consumes, produces and invests less in the short run if the resource has an amenity value than if doesn't whereas it is the contrary in the medium and long runs. However, and without surprise, the resource stock remains for ever higher with resource amenity than without.

Keywords: Exhaustible resources; sustainability; Hartwick's rule.; Hartwick's rule; Ressources non renouvelables; durabilité; règle de Hartwick; maximin. (search for similar items in EconPapers)
Date: 2008-04
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00275765v1
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Citations: View citations in EconPapers (34)

Published in 2008

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Journal Article: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
Working Paper: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
Working Paper: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
Working Paper: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
Working Paper: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
Working Paper: Hartwick's rule and maximin paths when the exhaustible resource has an amenity value (2008)
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