Environmental and Resource Economics

, Volume 63, Issue 2, pp 313–338 | Cite as

Empirical Testing of Genuine Savings as an Indicator of Weak Sustainability: A Three-Country Analysis of Long-Run Trends

  • Nick HanleyEmail author
  • Les Oxley
  • David Greasley
  • Eoin McLaughlin
  • Matthias Blum


Genuine Savings has emerged as a widely-used indicator of sustainable development. This approach to conceptualising what sustainability is about has strong links to work published by Anil Markandya and colleagues over 20 years ago. In this paper, we use long-term data stretching back to 1870 to undertake empirical tests of the relationship between Genuine Savings (GS) and future well-being for three countries: Britain, the USA and Germany. Our tests are based on an underlying theoretical relationship between GS and changes in the present value of future consumption. Based on both single country and panel results, we find evidence supporting the existence of a cointegrating (long run equilibrium) relationship between GS and future well-being, and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables. This provides some support for the GS measure of weak sustainability.


Weak sustainability Genuine savings Comprehensive investment Economic history Sustainable development indicators Cointegration 



Nick Hanley thanks the University of Waikato for hosting him during the writing of this paper. We thank The Leverhulme Trust for funding this work under the project “History and the Future: the Predictive Power of Sustainable Development Indicators” (Grant Number F00241). We also thank three referees and the editor of this special issue for helpful comments on earlier versions of the paper. Thanks also to Giles Atkinson, Kirk Hamilton and Jack Pezzey for many suggestions.

Supplementary material

10640_2015_9928_MOESM1_ESM.docx (32 kb)
Supplementary material 1 (docx 32 KB)


  1. Allen R (2014) American exceptionalism as a problem of global history. J Econ Hist 74(2):309–350CrossRefGoogle Scholar
  2. Arrow KJ, Dasgupta P, Goulder L, Mumford K, Oleson K (2012) Sustainability and the measurement of wealth. Environ Dev Econ 17(3):317–353CrossRefGoogle Scholar
  3. Barbier EB, Markandya A (2013) A new blueprint for a green economy. Earthscan, LondonGoogle Scholar
  4. Blum M, Hanley N, McLaughlin E (2013) Genuine savings and future well-being in Germany, 1850–2000. Stirling Economics discussion paper series, 2013-13Google Scholar
  5. Bohringer C, Jochem P (2007) Measuring the immeasurable: a survey of sustainability indices. Ecol Econ 63:1–8CrossRefGoogle Scholar
  6. Carr W (1991) A history of Germany, 1815–1990, 4th edn. London, RoutledgeGoogle Scholar
  7. Carter SB, Gartner SS, Haines MR, Olmstead AL, Sutch R, Wright G (2006) Historical statistics of the United States, earliest times to the present, millennial edn. Cambridge University Press, CambridgeGoogle Scholar
  8. Chichilnisky G, Heal G, Beltratti A (1995) The green golden rule. Econ Lett 49:174–179CrossRefGoogle Scholar
  9. De Long JB, Eichengreen B (1991) The marshall plan: history’s most successful structural adjustment program. NBER working paper no. 3899Google Scholar
  10. Dietz S, Neumayer E (2007) Weak and strong sustainability in the SEEA: concepts and measurement. Ecol Econ 61(4):617–626CrossRefGoogle Scholar
  11. Dumke RH (1990) Reassessing the wirtschaftswunder—reconstruction and postwar growth in West-Germany in an international context. Oxf Bull Econ Stat 52:451–491CrossRefGoogle Scholar
  12. Engle RF, Granger CWJ (1987) Co-integration and error correction: representation, estimation and testing. Econometrica 55(2):251–276CrossRefGoogle Scholar
  13. Feinstein CH, Pollard S (eds) (1988) Studies in capital formation in the United Kingdom, 1750–1920. Oxford University PressGoogle Scholar
  14. Ferreira S, Hamilton K, Vincent JR (2008) Comprehensive wealth and future consumption: accounting for population growth. World Bank Econ Rev 22:233–248CrossRefGoogle Scholar
  15. Ferreira S, Vincent JR (2005) Genuine savings: leading indicator of sustainable development? Econ Dev Cult Chang 53:737–754CrossRefGoogle Scholar
  16. Ferreira S, Moro M (2010) On the use of subjective well-being data for environmental valuation. Environ Res Econ 46:249–273CrossRefGoogle Scholar
  17. Greasley D, Hanley N, Kunnas J, McLaughlin E, Oxley L, Warde P (2013a) Comprehensive investment and future well-being in the USA, 1869–2000. Stirling Economics Discussion Paper 2013–06Google Scholar
  18. Greasley D, Madsen JB, Wohar ME (2013b) Long-run growth empirics and new challenges for unified theory. Appl Econ 45:3973–3987CrossRefGoogle Scholar
  19. 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 in the (very) long run. J Environ Econ Manag 61:171–188CrossRefGoogle Scholar
  20. Greasley D, Oxley L (1996) Discontinuities in competitivemness: the impact of the First World War on British industry. Econ Hist Rev 48:82–100CrossRefGoogle Scholar
  21. Greasley D, Oxley L (2010) Clio and the economist: making historians count. J Econ Surv 24:755–774CrossRefGoogle Scholar
  22. Hamilton K, Hartwick J (2005) Investing exhaustible resource rents and the path of consumption. Can J Econ 38(2):615–621CrossRefGoogle Scholar
  23. Hoffmann WG, Grumbach F, Hesse H (1965) Das Wachstum der deutschen Wirtschaft seit der Mitte des 19. Springer-Verlag, Berlin, JahrhundertsCrossRefGoogle Scholar
  24. Hamilton K, Clemens M (1999) Genuine savings rates in developing countries. World Bank Econ Rev 13:33–56CrossRefGoogle Scholar
  25. Hamilton K, Withagen C (2007) Savings and the path of utility. Can J Econ 40:703–713CrossRefGoogle Scholar
  26. Hansen BE (1992) Tests for parameter instability in regressions with I(1) processes. J Bus Econ Stat 10:321–335Google Scholar
  27. Helm D (2015) Natural capital: valuing the planet. Yale University Press, New HavenGoogle Scholar
  28. Johansen S (1991) Estimation and hypothesis testing of cointegration vectors in gaussian vector autoregressive models. Econometrica 59:1551–1580CrossRefGoogle Scholar
  29. Kao C (1999) Spurious regression and residual-based tests for cointegration in panel data. J Econ 90:1–44CrossRefGoogle Scholar
  30. Kunnas J, McLaughlin E, Hanley N, Greasley D, Oxley L, Warde P (2014) How should pollution from fossil fuels be included in long-run measures of National Accounts and Sustainable Development indicators? Scand Econ Hist Rev 62(3):243–265CrossRefGoogle Scholar
  31. Maddison A (2001) The World economy: a millennial perspective. OECD, ParisCrossRefGoogle Scholar
  32. McLaughlin E, Hanley N, Greasley D, Kunnas J, Oxley L, Warde P (2014) Historical wealth accounts for Britain: progress and puzzles in measuring the sustainability of economic growth. Oxf Rev Econ Policy 30:44–69CrossRefGoogle Scholar
  33. Mota RP, Domingos T (2013) Assessment of the theory of comprehensive national accounting with data for Portugal. Ecol Econ 95:188–196CrossRefGoogle Scholar
  34. Mota RP, Domingos T, Martins V (2010) Analysis of genuine savings and potential green net national product. Ecol Econ 69:1934–1942CrossRefGoogle Scholar
  35. Neumayer E (2010) Weak versus strong sustainability: exploring the limits of two paradigms, 3rd edn. Edward Elgar, CheltenhamCrossRefGoogle Scholar
  36. Olson M (1982) The rise and decline of nations: economic growth, stagflation and social rigidities. Yale University Press, YaleGoogle Scholar
  37. Oxley L, McAleer M (1993) Econometric issues in macroeconomic models with generated regressors. J Econ Surv 7(1):1–40CrossRefGoogle Scholar
  38. Pearce D, Barbier E, Markandya A (1990) Sustainable development: economics and development in the third World. Earthscan, LondonGoogle Scholar
  39. Pearce D, Markandya A, Barbier E (1989) Blueprint for a green economy. Earthscan, LondonGoogle Scholar
  40. Pearce DW, Atkinson G (1993) Capital theory and the measurement of sustainable development: an indicator of weak sustainability. Ecol Econ 8:103–108CrossRefGoogle Scholar
  41. Pemberton M, Ulph D (2001) Measuring income and measuring sustainability. Scand J Econ 103:25–40CrossRefGoogle Scholar
  42. Perron P (1989) The great crash, the oil price shock and the unit root hypothesis. Econometrica 57:1361–1401CrossRefGoogle Scholar
  43. Pezzey JCV (2004) One-sided sustainability tests with amenities, and changes in technology, trade and population. J Environ Econ Manag 48:613–631CrossRefGoogle Scholar
  44. Pezzey JCV, Hanley H, Turner K, Tinch D (2006) Comparing augmented sustainability measures for Scotland: Is there a mismatch? Ecol Econ 57:70–74CrossRefGoogle Scholar
  45. Phillips PCB, Hansen B (1990) Statistical inference in instrumental variables regression with I(1) processes. Rev Econ Stud 57:99–125CrossRefGoogle Scholar
  46. Rhode PW (2002) Gallman’s annual output series for the United States, 1834–1909. NBER working paper, Working Paper 8860Google Scholar
  47. Solow R (1986) On the intergenerational allocation of natural resources. Scand J Econ 88:141–149CrossRefGoogle Scholar
  48. Tanguy I (2013) Sustainability is compatible with decreasing social welfare. Econ Bull 33:1116–1125Google Scholar
  49. Weitzman M (1997) Sustainability and technical progress. Scand J Econ 99:1–13CrossRefGoogle Scholar
  50. World Bank (2006) Where is the wealth of nations? World Bank, Washington, DCGoogle Scholar
  51. World Bank (2011) The changing wealth of nations. World Bank, Washington, DCGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • Nick Hanley
    • 1
    Email author
  • Les Oxley
    • 2
  • David Greasley
    • 3
  • Eoin McLaughlin
    • 1
  • Matthias Blum
    • 4
  1. 1.Department of Geography and Sustainable DevelopmentUniversity of St. AndrewsFifeScotland
  2. 2.University of WaikatoWaikatoNew Zealand
  3. 3.University of EdinburghEdinburghScotland, UK
  4. 4.Queens University BelfastBelfastUK

Personalised recommendations