Working Paper
Constant Consumption and the Economic Depreciation of Natural Capital: The Non-Autonomous Case
Ngo Van Long, John M. Hartwick
CES, Munich, 1996
CES Working Paper No. 114
CES, Munich, 1996
CES Working Paper No. 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.
Keywords: economic depreciation, natural capital, environment, constant consumption.