Sustainable growth: The extraction-saving relationship

Bazhanov, Andrei (2008): Sustainable growth: The extraction-saving relationship.

Abstract

The paper presents two new results for the Dasgupta-Heal-Solow-Stiglitz model with an essential nonrenewable resource:

(1) the pattern of resource extraction can be more important for sustainable growth than the pattern of saving when the Hotelling Rule modifier is not small enough;

(2) the qualitative behavior of the long-run per capita consumption can be examined along any smooth enough path of extraction using the "sustainability functional" introduced in the paper.

• Item Type: MPRA Paper
• Language: English
• Keywords: sustainable growth; modified Hotelling Rule; sustainability number; Hubbert curve consumption
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products

References

Andreeva, A.A. and Bazhanov, A.V., 2007. Scenarios of transition to sustainable oil extraction in Russia (Stsenarii perehoda k ustojchivym tempam dobychi nefti v Rossii). MPRA Paper No. 5343. Available at: http://mpra.ub.uni-muenchen.de/5343/ (in Russian, with English abstract).

Bazhanov, A.V., 2006. Variation principles for modeling in resource economics (Variatsionnye printsipy modelirovaniya v resursnoj economike). Vestnik DVO RAN 6: 5-13. MPRA Paper No. 1309. Available at: http://mpra.ub.uni-muenchen.de/1309/ (in Russian, with English abstract).

Bazhanov, A.V., 2007a. The peak of oil extraction and consistency of the government's short- and long-run policies. MPRA Paper No. 2507. Presented at the Seminar of School of Economics, Seoul National University, Seoul, March 14, 2007.

Bazhanov, A.V., 2007b. The transition to an oil contraction economy. Ecol. Econ., 64: 186-193.

Bazhanov, A.V., 2008. On Stollery's case of temperature in the utility function alone. In: T. Aronsson and K.G. Lofgren (Editors), Handbook of Environmental Accounting. To be published by Edward Elgar Publishing Limited.

Bazhanov, A.V. and Vyscrebentsev, A.S., 2006. The adequacy of Hubbert's curves for the forecasting of the rates of oil extraction (Adekvatnost' krivyh Hubberta dlja prognozirovanija tempov dobychi nefti). MPRA Paper No. 479, October 17, 2006. Available at: http://mpra.ub.uni-muenchen.de/479/ (in Russian, with English abstract).

Caillaud, B., Guesnerie, R., Rey, P. and Tirole, J., 1988. Government intervention in production and incentives theory: a review of recent contributions. RAND J. Econ. 19: 1-26.

CERA, 2006. Why the peak oil theory falls down: Myths, legends, and the future of oil resources. (November 10, 2006). Available at: http://www.cera.com/aspx/cda/client/report/reportpreview.aspx?CID=8437\&KID= .

Dasgupta, P. and Heal, G., 1974. The optimal depletion of exhaustible resources. Rev. Econ. Stud. 41: 3-28.

Dasgupta, P. and Heal, G., 1979. Economic Theory and Exhaustible Resources. Cambridge University Press, Cambridge, Eng., 501 pp.

Davis, G.A. and Cairns, R.D., 1999. Valuing petroleum reserves using current net price. Econ. Inquiry 37: 295-311.

Dixit, A., Hammond, P. and Hoel, M., 1980. On Hartwick's rule for regular maximin paths of capital accumulation and resource depletion. Rev. Econ. Stud. 47: 551-556.

Elekdag, S., Lalonde, R., Laxton, D., Muir, D. and Pesenti, P., 2008. Oil price movements and the global economy: A model-based assessment. NBER Working Paper No. W13792.

Gaudet, G., 2007. Natural resource economics under the rule of Hotelling. Can. J. Econ. 40: 1033-1059.

Grimaud, A. and Rouge, L., 2005. Polluting non-renewable resources, innovation, and growth: welfare and environmental policy. Resource Energy Econ. 27: 109-129.

Hamilton, K., Ruta, G. and Tajibaeva, L., 2006. Capital accumulation and resource depletion: A Hartwick Rule counterfactual. Environ. Resource Econ. 34: 517-533.

Hartwick, J.M., 1977. Intergenerational equity and the investing of rents from exhaustible resources. Amer. Econ. Rev. 67: 972-974.

Hubbert, M.K., 1956. Nuclear energy and the fossil fuels. Amer. Petrol. Inst. Drilling & Production Practice. Proc. Spring Meeting, San Antonio, Texas., 7-25.

IEA, 2004. Analysis of the impact of high oil prices on the global economy. International Energy Agency. May 2004. Available at: http://www.iea.org/Textbase/Papers/2004/High\_Oil\_Prices.pdf

IMF, 2007. Understanding the link between oil prices and the world economy. World Economic Outlook, April 2007, Washington, D.C.: IMF, 17-19.

Karp, L. and Livernois, J., 1992. On efficiency-inducing taxation for a non-renewable resource monopolist. J. Public Econ. 49: 219-239.

Laherrere, J.H., 2000. Learn strengths, weaknesses to understand Hubbert curve. Oil & Gas J. 98(16): 63-73.

Pezzey, J.C.V., 2002. Sustainability policy and environmental policy. Australian National University. Economics and Environment Network Working Paper EEN0211.

Solow, R.M., 1974. Intergenerational equity and exhaustible resources. Rev. Econ. Stud. 41: 29-45.

Stiglitz, J., 1974. Growth with exhaustible natural resources: Efficient and optimal growth paths. Rev. Econ. Stud. 41: 123-137.

Stollery, K.R., 1998. Constant utility paths and irreversible global warming. Can. J. Econ. 31: 730-742.

World, 2007. Worldwide look at reserves and production. Oil & Gas J. 105(48): 24-25.

Yergin, D., 1991. The Prize: The epic quest for oil, money, and power. New York: Simon & Schuster. 912 pp.