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Non-renewable resources, subsistence consumption, and Hartwick's investment rule

Jürgen Antony and Torben Klarl

Resource and Energy Economics, 2019, vol. 55, issue C, 124-142

Abstract: This note is concerned with efficient use of non-renewable resources if households are characterized by Stone-Geary preferences with a minimum subsistence level of consumption. We provide a closed form solution for the case of Cobb–Douglas production with constant returns to scale in reproducible capital and resource input. The existence of a subsistence level of consumption implies the economy to converge asymptotically towards a growth path that satisfies the well known Hartwick investment rule. We calibrate the model reflecting the endowment of resource depending low-income countries and confront it with the World Bank's poverty lines.

Keywords: Hartwick rule; Subsistence consumption; Non-renewable resources (search for similar items in EconPapers)
JEL-codes: Q30 E21 O44 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.reseneeco.2018.11.002

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