Conditions for Sustainable Optimal Economic Development
Y. Hossein Farzin ()
Review of Development Economics, 2006, vol. 10, issue 3, 518-534
Abstract:
This paper shows that, for dynamic optimizing economies with different types of natural resource, environmental, and human‐made capital stocks, a necessary and sufficient condition for permanently sustaining an optimal utility/consumption level is the stationarity of the current‐value Hamiltonian. For economies whose development is not exogenously and directly affected by time (i.e., time‐autonomous economies), this stationarity condition generalizes Dixit et al.’s (1980) “zero‐net‐aggregate‐investment” rule of sustain‐ability, which in turn generalizes Solow‐Hartwick’s sustainability rule. For non‐autonomous economies, the stationarity condition is not generally fulfilled, and the current‐value Hamiltonian under (over) estimates the true welfare level by an amount equal to the discounted value of the net “pure time effect.” For the non‐autonomous case of a time‐dependent utility discount rate, a general condition on the discount rate function (of which the hyperbolic discount rate function is a special case) upholds the results obtained for autonomous cases. The paper concludes with a discussion of policies that promote both optimality and sustainability objectives.
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://doi.org/10.1111/j.1467-9361.2006.00338.x
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:10:y:2006:i:3:p:518-534
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669
Access Statistics for this article
Review of Development Economics is currently edited by E. Kwan Choi
More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().