Genuine savings as a test of New Zealand weak sustainability
The key aims of this paper are to: (1) to extend the World Bank’s (WB) measure of genuine savings (GS) for New Zealand by using a longer time series of data, 1950–2015; (2) improve GS estimates for New Zealand by adding additional dimensions to GS, i.e. forestry; (3) investigate the relationship between several GS measures and the discounted values of GDP per capita and consumption per capita, used to proxy well-being; (4) test a series of hypotheses which relate GS to the change in future well-being using the framework proposed by Ferreira et al. (World Bank Econ Rev 22(2):233–248, 2008. https://doi.org/10.1093/wber/lhn008) and (5) investigate the effects of a growing population on the availability of future capital stocks by considering the consequences of “wealth-dilution” as defined by Ferreira et al. (2008). The paper makes a contribution to the literature on GS, particularly in the context of New Zealand, by considering patterns of GS and well-being over a longer time span of data than have been previously used and add to a relatively small, but growing literature on tests of GS using long or relatively long time-series data [see, e.g. Greasley et al. (J Environ Econ Manag 67(2):171–188, 2014. https://doi.org/10.1016/j.jeem.2013.12.001, Environ Dev Econ 22:674–98, 2017) and Hanley et al. (Enviro Resour Econ 63(2):313–338, (2016). https://doi.org/10.1007/s10640-015-9928-7]. We conclude, based on the data used here, that New Zealand’s GS has been positive (i.e. weakly sustainable), since the start of our data series, even without allowing for the contribution of technological advancement. However, we also conclude that the effects of a growing population and a savings gap have led to a “wealth-dilution” effect needed to maintain real wealth per capita, as we estimate that there was an average savings gap (GS as a percentage of gross national savings) over the period 1955–2015 of 0.5% per annum.
KeywordsSustainability Genuine savings Natural capital Hartwick rule New Zealand
The funding was provided by Marsden Fund.
- Bank, W. (2011). The changing wealth of nations. Retrieved from https://openknowledge.worldbank.org/handle/10986/2252.
- Black, S. E., & Lynch, L. M. (1996). Human-capital investments and productivity. The American Economic Review,86(2), 263–267.Google Scholar
- Blum, M., Ducoing, C., & McLaughlin, E. (2017a). A sustainable century? Genuine savings in developing and developed countries, 1900–2000. National wealth: What is missing, why it matters. Oxford: Oxford University Press.Google Scholar
- Bolt, K., Matete, M., & Clemens, M. (2002). Manual for calculating adjusted net savings (pp. 1–23). World Bank: Environment Department.Google Scholar
- Brown, R. P. C., Asafu-Adjaye, J., Draca, M., & Straton, A. (2005). How useful is the genuine savings rate as a sustainability indicator for regions within countries? Australia and Queensland compared. Australian Economic Review,38(4), 370–388. https://doi.org/10.1111/j.1467-8462.2005.00381.x.CrossRefGoogle Scholar
- Dasgupta, P. & Heal, G. (1974). The optimal depletion of exhaustible resources. The Review of Economic Studies, 41, 3–28. Oxford University Press. Retrieved from http://www.jstor.org/stable/2296369.
- Dasgupta, P., & Mäler, K. G. (2001). Wealth as a criterion for sustainable development. Ho Chi Minh: Citeseer.Google Scholar
- Ferreira, S, & Vincent, J. R. (2005). Genuine savings: Leading indicator of sustainable development? Economic Development and Cultural Change, 53(3), 737–754. Retrieved from http://www.jstor.org/stable/10.1086/426834.
- Glass, H., & Choi, W-K. (2001). Brain drain or brain exchange. Working paper 01/22 New Zealand Treasury.Google Scholar
- Greasley, D., Hanley, N., Kunnas, J., McLaughlin, E., Oxley, L., & Warde, P. (2014). Testing genuine savings as a forward-looking indicator of future well-being over the (very) long-run. Journal of Environmental Economics and Management,67(2), 171–188. https://doi.org/10.1016/j.jeem.2013.12.001.CrossRefGoogle Scholar
- Greasley, D., & Madsen, J. B. (2016). The rise and fall of exceptional Australian Incomes since 1800. Australian Economic History Review,37, 37–53.Google Scholar
- Hamilton, K. (2006). Where is the wealth of nations? Measuring capital for the 21st century. Washington, DC: World Bank Publications.Google Scholar
- Hamilton, K. & Hartwick, J. M. (2005). Investing exhaustible resource rents and the path of consumption. Canadian Journal of Economics, 38(2), 615–621. Retrieved from http://search.ebscohost.com.ezproxy.waikato.ac.nz/login.aspx?direct=true&db=bth&AN=16599915&site=ehost-live.
- Hartwick, J. M. (1977). Intergenerational equity and the investing of rents from exhaustible resources. American Economic Review,67(5), 972–974.Google Scholar
- Hollinger, D., Maclaren, J., Beets, P., & Turland, J. (1993). Carbon sequestration by New Zealand’s plantation forests. New Zealand Journal of Forestry Science,23(2), 194–208.Google Scholar
- Homer, S. & Sylla, R. (2005). A history of interest rates. Wiley Finance. Retrieved from https://books.google.co.nz/books?id=OOQKf4asZ9EC.
- NZIER. (2017). Plantation forestry statistics: Contribution of forestry to New Zealand.Google Scholar
- Oxley, L. (2017), Sustainable Economic Development: Origins, Concepts, Models and Metrics, Working Paper, University of Waikato.Google Scholar
- Pearce, D. W., Markandya, A. & Barbier, E. (1989). Blueprint for a green economy (Vol. 1). Earthscan.Google Scholar
- Pemberton, M. & Ulph, D. (2001). Measuring income and measuring sustainability. The Scandinavian Journal of Economics, 103(1), 25–40. Wiley Online Library.Google Scholar
- Quiggin, J. (1997). Discount rates and sustainability. International Journal of Social Economics, 24(1/2/3), 65–90. MCB UP Ltd.Google Scholar
- Solow, R. M. (1974). The economics of resources or the resources of economics. The American Economic Review, 64(2), 1–14. Retrieved from http://www.jstor.org/stable/1816009.
- UNU-IHDP and UNEP. (2012). Inclusive wealth report 2012: Measuring progress toward sustainability. Cambridge: Cambridge University Press.Google Scholar
- UNU-IHDP and UNEP. (2014). Inclusive wealth report 2014. Measuring progress toward sustainability. Cambridge: Cambridge University Press.Google Scholar
- World Bank. (2006). Where is the wealth of nations? Measuring capital for the 21st Century. Washington, DC: The International Bank for Reconstruction and Development/The World Bank.Google Scholar
- World Bank. (2011). The changing wealth of nations: Measuring sustainable development in the new millennium. Washington, DC: The International Bank for Reconstruction and Development/The World Bank.Google Scholar
- World Bank. (2018). The changing wealth of nations 2018: Building a sustainable future. Washington, DC: The International Bank for Reconstruction and Development/The World Bank.Google Scholar