Characterizing Sustainability in Discrete Time

28 Pages Posted: 31 Oct 2018

See all articles by Geir B. Asheim

Geir B. Asheim

University of Oslo - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Tapan Mitra

Cornell University - Department of Economics

Date Written: 2018

Abstract

We examine the investment rule that must be satisfied by an efficient and egalitarian path in a discrete-time version of the Dasgupta-Heal-Solow model of capital accumulation and resource depletion. In the discrete-time model, competitive valuation of net investments in terms of early and late pricing differs. We redefine Hartwick's rule to require zero value of net investments at a valuation rule intermediate between these two. Using this definition, we show that along an efficient and egalitarian path, Hartwick's rule is followed in all time periods. We thereby establish the converse of Hartwick's result in discrete time, and we do so under weaker assumptions than those in the existing literature on how output varies as a function of capital and resource use. Our redefinition of Hartwick's rule follows naturally if discrete time is viewed as providing information at discrete points in time of an underlying continuous-time process.

Keywords: intergenerational equity, sustainable development

JEL Classification: D630, O410, Q010

Suggested Citation

Asheim, Geir B. and Mitra, Tapan, Characterizing Sustainability in Discrete Time (2018). CESifo Working Paper No. 7206, Available at SSRN: https://ssrn.com/abstract=3275379 or http://dx.doi.org/10.2139/ssrn.3275379

Geir B. Asheim (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47-2285 5498 (Phone)
+47-2285 5035 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Tapan Mitra

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6283 (Phone)

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