On the Role of Natural Capital - Sustainability, Dynamic (in)Efficiency, and Inclusive Wealth

Torben M Andersen, Løchte Jørgensen, Cecilie Marie and Allan Soerensen

No 21292, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Can future generations achieve living standards at least equal to those of the present? We analyse this question in overlapping-generations (OLG) models, both a small analytical and a calibrated version, where natural capital is introduced following Dasgupta (2021). In standard OLG models, dynamic efficiency requires that the market rate of return exceeds population growth, r > n. With natural capital, the condition becomes r > n+e, where e reflects externalities from the natural capital stock. Economies may therefore satisfy r > n yet remain dynamically inefficient. Along the competitive equilibrium path, degrading natural capital can trigger tipping points in production and welfare, undermining intergenerational sustainability

Keywords: Sustainability (search for similar items in EconPapers)
JEL-codes: D62 E21 Q01 Q20 (search for similar items in EconPapers)
Date: 2026-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21292 (application/pdf)

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:cpr:ceprdp:21292

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21292

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().