Constant Consumption Paths in Open Eocnomies with Exhaustible Resources

John Hartwick

Review of International Economics, 1995, vol. 3, issue 3, 275-83

Abstract: We examine the effects of international trade on the paths of investment which maintain consumption constant over time in each country, each of which produces an essential exhaustible resource such as oil. For countries identical except for the sizes of their oil stocks, the investing of own oil rents in machine capital will not result in constant consumption in each country. Adjusted rent-investment strategies are developed which do yield constant consumption in each country. We also report results on the link in each country between its consumption levels and aggregate current wealth. Copyright 1995 by Blackwell Publishing Ltd.

Date: 1995
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