Non-Renewable Resource Use Sustainability and Public Debt

Nicolas Clootens and Francesco Magris

No 2032, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: The sustainability of resource use and the management of public nances are both long run issues that are linked to each other through savings decisions. In order to study them conjointly, this paper introduces a public debt stabilization constraint in an overlapping generation model in which non-renewable resources constitute a necessary input in the production function and belong to agents. It shows that stabilization of public debt at high level (as share of capital) may prevent the existence of a sustainable development path, i.e. a path on which per capita consumption is not decreasing. Public debt thus appears as a threat to sustainable development. It also shows that higher public debt-to-capital ratios (and public expenditures-to-capital ones) are associated with lower growth. Two transmission channels are identi ed. As usual, public debt crowds out capital accumulation. In addition, public debt tends to increase resource use which reduces the rate of growth. We also provide a numerical analysis of the dynamics that shows that the economy is characterized by saddle path stability. Finally, we show that the public debt-to-capital ratio may be calibrated to implement the social planner optimal allocation according to which the growth rate is increasing in the degree of patience.

Keywords: non-renewable resources; growth; public finances; overlapping generations (search for similar items in EconPapers)
JEL-codes: H63 Q32 Q38 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-09, Revised 2023-08
New Economics Papers: this item is included in nep-dge and nep-env
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Related works:
Journal Article: Nonrenewable resource use sustainability and public debt (2024)
Working Paper: Nonrenewable resource use sustainability and public debt (2023)
Working Paper: Non-Renewable Resource Use Sustainability and Public Debt (2020)
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