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The capital gains from trade are not enough: Evidence from the environmental accounts of Venezuela and Mexico

Maria del Mar Rubio Varas

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In principle, a country can not endure negative genuine savings for long periods of time without experiencing declining consumption. Nevertheless, theoreticians envisage two alternatives to explain how an exporter of non-renewable natural resources could experience permanent negative genuine savings and still ensure sustainability. The first one alleges that the capital gains arising from the expected improvement in the terms of trade would suffice to compensate for the negative savings of the resource exporter. The second alternative points at technological change as a way to avoid economic collapse. This paper uses the data of Venezuela and Mexico to empirically test the first of these two hypotheses. The results presented here prove that the terms of trade do not suffice to compensate the depletion of oil reserves in these two open economies.

Keywords: Exhaustive resources; environmental accounts; net national product; genuine savings; foreign trade (search for similar items in EconPapers)
JEL-codes: F18 N5 P24 Q01 (search for similar items in EconPapers)
Date: 2003-05
New Economics Papers: this item is included in nep-acc and nep-env
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