| Author/Presenter |
Bin Hu (University of Guelph) |
| Title |
PV-optimality and sustainability revisited |
| Abstract |
Sustainability and PV-optimality are different social objectives. Pezzey and Withagen (1998) studied the sustainability of PV-optimal economies in the well-known Dasgupta-Heal economy (with one capital and one non-renewable resource stock). They proved that the time path of consumption is single-peaked and initially sustainable for low discount rate. This paper investigates the role of discount rate in achieving the possible sustainable path of PV-optimal economies along the time horizon under different scenarios. Whether the PV-optimal economy is also sustainable at certain time depends on the level of resource stock and discount rate of the planner at that time. In addition, by solving the closed form of consumption path in Dasgupta-Heal model with technical progress, the consumption path can be U-shaped for some range of discount rate instead of single-peaked in the case without technical progress. Furthermore, a simple relation among discount rate, technical progress and capital share in production function has been found to achieve long-run sustainability in PV-optimal economy. |
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