With exhaustible resources, can a developing country escape from the poverty trap ?

This paper studies the optimal growth of a developing non-renewable natural resource producer, which extracts the resource from its soil and produces a single consumption good with man-made capital. Moreover, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domestic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We study the optimal extraction and depletion of the exhaustible resource and the optimal paths of accumulation of capital and of domestic consumption. We show that the extent to which the country will optimally escape from the poverty trap and the exhaustible resource will be a blessing depends on the characteristics of its technology and of the revenues from the resource function, on its impatience, on the level of its initial stock of capital and on the abundance of the natural resource. If the marginal productivity of capital at the origin is greater than the sum of the social discount rate and the depreciation rate, the country will accumulate capital along the entire growth path and will escape from the poverty trap, whatever its initial stocks of capital and resource, and provided that the marginal revenue obtained from the exportation of the resource is finite at the origin. On the contrary, if the marginal productivity of capital is lower than the depreciation rate whatever the level of capital and if moreover the initial stock of capital is small, then the country will never accumulate ; it will consume the revenues obtained from selling abroad the extracted resource, until there is no resource left and the economy collapses. We also show that any optimal path may be decentralized in a competitive equilibrium by using a tax/subsidy scheme for firms.Optimal growth, exhaustible resource, convex-concave technology, poverty trap, competitive equilibrium with tax/subsidy.

With Exhaustible Resources, Can A Developing Country Escape From The Poverty Trap?

This paper studies the optimal growth of a developing non-renewable natural resource producer. It extracts the resource from its soil, and produces a single consumption good with man-made capital. More- over, it can sell the extracted resource abroad and use the revenues to buy an imported good, which is a perfect substitute of the domes- tic consumption good. The domestic technology is convex-concave, so that the economy may be locked into a poverty trap. We show that the extent to which the country will escape from the poverty trap depends, besides the interactions between its technology and its impatience, on the characteristics of the resource revenue function, on the level of its initial stock of capital, and on the abundance of the natural resource.optimal growth;non-renewable resource;convex-concave technology;poverty trap;resource curse

Distribution and sustainable development in a natural resource-based economy

There is still some ambiguity about what is sustainable development. From an economic point of view it involves maintaining a stock of assets for posterity that is equal to or greater than the stock of assets of the current generation. This is the basis of the capital approach to sustainable development. To measure how sustainable an economy is, based on the capital basis of sustainable development, multilateral institutions such as the World Bank use wealth accounting combined with the genuine savings approach to measure how well economies are saving for the future, net of current asset depreciation. These measures are useful for telling policy makers how their policies are contributing to sustainability and whether their economies are on a sustainable development path. Although these measures tell which assets are being depleted and the level of savings required, they do not tell why inadequate savings or inadequate investments might be occurring and how these assets are distributed among income groups within the economy. These measures are also not linked explicitly with the development prospects of the country and the needs of the current generation. This thesis attempts to assess if distributional outcomes affect how much countries save and therefore whether this has any impact on sustainability. To examine the impact of distribution on sustainability, a case study of Trinidad and Tobago (T&T) is conducted. T&T has had a negative genuine savings rate for most of the last two decades, primarily due to the excessive exploitation of its natural resources (oil and natural gas) without sufficient savings or reinvestment of the revenues from these resources. Has the distribution of these resource rents had any impact on saving outcomes? An attempt is made to answer these questions by assessing how government expenditure is distributed and who benefits most from the exploitation of the natural resources. The analyses contained within the thesis show that expenditure on energy subsidies, the distribution of human capital and the overall distributions of rents are all regressively distributed

A confrontation of economic and theological approaches to “ending poverty” in Africa

We seek to assess the adequacy of an “economic” as opposed to a “Christian” worldview in confronting one of the major challenges to the world, namely the chronic nature of absolute poverty in much of Africa. Our study comprises, first, an overview and contrast of the two approaches in general terms and, second, a critical examination of economist Jeffrey Sachs’ The End of Poverty (which undergoes a theological critique) and theologian Ronald Sider’s Rich Christians in an Age of Hunger (which is subjected to economic criticism). Overall, we find that economic analyses rely on an excessively narrow view of human motivation, which may vitiate secular attempts to aid development. A blend of Biblical understanding and economic insight is needed for a genuine transformation of the lives of the poor to take place

Green net national product for the sustainability and social welfare

This paper discusses the theory of green national accounting and, emphasizes on social welfare and sustainable accounting. Weitzman provides a foundation for net national product as the stationary equivalent of a wealth maximizing path when there is a constant interest rate and no exogenous technological progress. An attempt has been taken here to make the relationship with different incomes and green net national product, under no exogenous technological progress and a constant utility discount rate. The paper shows that green net national product measures the gross social profit rather than net social profit

Equality, Security and Sustainability: In Search of Virtuous Circles

Many people and institutions are conducting research on inequality, security, or environmental sustainability. Some are looking at two of these issues together. None, to our knowledge, are examining all three simultaneously, or looking in detail at the interactions between them. This matters. Of the 17 Sustainable Development Goals (SDGs), nine relate directly to these subjects, and eight have strong indirect linkages. Crucially, while each SDG can be considered on its own terms, they should really be viewed as interdependent objectives: the level and nature of growth and industrialisation, for example, is inextricably linked with environment goals. The same is true of the three objectives that form the title of this report. From a development perspective, the aim is not to foster societies that are equal or secure or sustainable, but to understand the pathways that could potentially lead to societies with all of these characteristics. As a prerequisite, we need to identify the ways that these goals can interact during the development process, both negatively and positively, and understand better how negative interactions might be reduced and positive synergies enhanced.UK Department for International Developmen

Greening Economy, Graying Society

The world economy is affecting ecosystems in a way that puts future living standards at risk. Important issues include global warming, fading resource stocks, scarce water supplies, and decreasing biodiversity. It is broadly ac-accepted that the future of our planet should be one of our major concerns. But when it comes to concrete policies, most clearly those related to climate change, grave difficulties arise. This may come as a surprise. In fact, it should not be surprising. Forward-looking and green policies have always proved to be demanding and controversial. At the global scale, national policy difficulties are only compounded. There is not sufficient consensus across the different countries. World society is not very dynamic in problem solving. Rather, it is graying and inertial, cultivating conservative views and institutions. Economic interests and political perceptions diverge widely across countries. While the potentials offered by green technologies are huge, institutions have not yet adapted to meet the challenges. The political debate lacks sufficient focus; it includes very diverse opinions and notions on admittedly complex issues. It is true that the most prominent sustainability policy, climate policy, combines the most difficult and complex conditions for policy making in a single subject. Correction of a big market failure, international consensus building, long-run planning, major uncertainties, huge equity concerns, and very heterogeneous country interests are ingredients that would bedevil any political decision. On the bright side, concepts such as “green economy” and “sustainable development” have prominently entered the political debate, documenting the rising number of bridges between economy and ecology. Re-source-efficient technologies are increasingly being developed and applied. Yet, while everyone would highly welcome political solutions to the climate problem, accepting their consequences is much less widely embraced. These include significant reductions in natural resource use, especially with fossil fuels. They also entail acknowledging responsibility for past emissions and obligations to other countries and future generations. Consistent sustainability policies require a framework and an institutional setting that has yet to be built and globally implemented. Such a framework would end-able policymakers exploiting the huge potentials for greening the economy. Many scientific and applied contributions on sustainability have al-ready been published. But the majority of the advocated policies have not been implemented; major problems such as global warming have not yet been properly addressed. It appears that sustainability policies are not attracting sufficient political support. By pointing to the profound problems inherent in policy making in this area, this book explains why this is the case. It also provides the elements needed to increase general understanding and to find political consensus. Compared to the much broader scientific contributions on sustainability, some authored by large numbers of international researchers in different disciplines, the present book takes a more modest approach. It draws on selected research results to explain the most important sustainability is-sues from the point of view of economics. The book points at central underlying problems and misperceptions with the aim of increasing ambitions and rationality in political decision making. It reflects the high complexity of reaching sustainable development, which will require the contribution of social sciences involving many different perspectives. The book uses neither formal models nor mathematical equations. These can be found in the underlying original academic works cited in the references. The approach follows that of the famous economist Alfred Mar-shall, who advised using formal analysis until the results were fully de-rived but then to “burn” the mathematics, translate the conclusions into normal language, and illustrate them by “examples that are important in real life.” In following this procedure, this book aims to make the economic approach to sustainability attractive for a broader audience and a useful input to policy making

Greening Economy, Graying Society

The world economy is affecting ecosystems in a way that puts future living standards at risk. Important issues include global warming, fading resource stocks, scarce water supplies, and decreasing biodiversity. It is broadly ac-accepted that the future of our planet should be one of our major concerns. But when it comes to concrete policies, most clearly those related to climate change, grave difficulties arise. This may come as a surprise. In fact, it should not be surprising. Forward-looking and green policies have always proved to be demanding and controversial. At the global scale, national policy difficulties are only compounded. There is not sufficient consensus across the different countries. World society is not very dynamic in problem solving. Rather, it is graying and inertial, cultivating conservative views and institutions. Economic interests and political perceptions diverge widely across countries. While the potentials offered by green technologies are huge, institutions have not yet adapted to meet the challenges. The political debate lacks sufficient focus; it includes very diverse opinions and notions on admittedly complex issues. It is true that the most prominent sustainability policy, climate policy, combines the most difficult and complex conditions for policy making in a single subject. Correction of a big market failure, international consensus building, long-run planning, major uncertainties, huge equity concerns, and very heterogeneous country interests are ingredients that would bedevil any political decision. On the bright side, concepts such as “green economy” and “sustainable development” have prominently entered the political debate, documenting the rising number of bridges between economy and ecology. Re-source-efficient technologies are increasingly being developed and applied. Yet, while everyone would highly welcome political solutions to the climate problem, accepting their consequences is much less widely embraced. These include significant reductions in natural resource use, especially with fossil fuels. They also entail acknowledging responsibility for past emissions and obligations to other countries and future generations. Consistent sustainability policies require a framework and an institutional setting that has yet to be built and globally implemented. Such a framework would end-able policymakers exploiting the huge potentials for greening the economy. Many scientific and applied contributions on sustainability have al-ready been published. But the majority of the advocated policies have not been implemented; major problems such as global warming have not yet been properly addressed. It appears that sustainability policies are not attracting sufficient political support. By pointing to the profound problems inherent in policy making in this area, this book explains why this is the case. It also provides the elements needed to increase general understanding and to find political consensus. Compared to the much broader scientific contributions on sustainability, some authored by large numbers of international researchers in different disciplines, the present book takes a more modest approach. It draws on selected research results to explain the most important sustainability is-sues from the point of view of economics. The book points at central underlying problems and misperceptions with the aim of increasing ambitions and rationality in political decision making. It reflects the high complexity of reaching sustainable development, which will require the contribution of social sciences involving many different perspectives. The book uses neither formal models nor mathematical equations. These can be found in the underlying original academic works cited in the references. The approach follows that of the famous economist Alfred Mar-shall, who advised using formal analysis until the results were fully de-rived but then to “burn” the mathematics, translate the conclusions into normal language, and illustrate them by “examples that are important in real life.” In following this procedure, this book aims to make the economic approach to sustainability attractive for a broader audience and a useful input to policy making