Savings Growth and the Path of Utility

K. Hamilton, C.A.A.M. Withagen

Research output: Contribution to journalArticle

Abstract

We derive an expression relating the change in instantaneous utility to the growth of net (genuine) saving in an economy with multiple stocks and externalities that maximizes welfare in the utilitarian sense. This result is then shown to hold for decentralized competitive efficient economies as well, to yield an extension of the Hartwick rule: instantaneous utility is non-declining along a development path if genuine saving is decreasing. By way of example the rule is applied as a constant genuine saving rate rule in a simple Dasgupta-Heal-Solow-Stiglitz economy. The rule yields a path with unbounded consumption and higher wealth than on the standard Hartwick constant consumption path. © 2007 The Canadian Economics Association.
LanguageEnglish
Pages703-713
Number of pages10
JournalCanadian Journal of Economics
Volume40
Issue number2
DOIs
StatePublished - 2007

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Genuine savings
Savings
Saving rate
Hartwick rule
Externalities
Wealth
Development path

Cite this

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Savings Growth and the Path of Utility. / Hamilton, K.; Withagen, C.A.A.M.

In: Canadian Journal of Economics, Vol. 40, No. 2, 2007, p. 703-713.

Research output: Contribution to journalArticle

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