Constant Consumption and the Economic Depreciation of Natural Capital: The Non-Autonomous Case
Ngo Van Long
McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
John M. Hartwick
CES, University of Munich WP 114
We investigate economic depreciation of natural capital for cases of non-stationary output prices, technology, and interest rates. For the former two cases (exogenous movements in prices and technology), constant consumption emerges under a strategy of investing to cover off economic depreciation. The interest rate case requires a modified sinking fund strategy.
JEL Classification: E21, E22, Q20working papers series
Date posted: January 27, 1997
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