How Substitutable is Natural Capital?

Anil Markandya and Suzette Pedroso
Additional contact information
Suzette Pedroso: World Bank

No 2005.88, Working Papers from Fondazione Eni Enrico Mattei

Abstract: One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested CES production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found.

Keywords: Wealth accounting; Natural resources; Nested CES production function (search for similar items in EconPapers)
JEL-codes: O47 Q24 Q32 (search for similar items in EconPapers)
Date: 2005-06
New Economics Papers: this item is included in nep-agr, nep-dev, nep-ene and nep-env
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: How substitutable is natural capital? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2005.88

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