Adjusting Green NNP to Measure Sustainability
Weitzman provides a foundation for NNP as the stationary equivalent of a wealth-maximizing path when there is a constant interest rate and no exogenous technological progress. Here, the implications of Weitzman’s foundation are explored in a case encountered in resource models, i.e., the case of nonconstant interest rates. In a setting that allows for exogenous technological progress, an expression for NNP is obtained that adjusts Green NNP for anticipated capital gains and interest rate effects to produce a measure that indicates sustainability. This result is important when measuring the relative sustainability of resource rich and resource poor countries.
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