Genuine Savings Rates Research Articles

Using Genuine Savings for Climate Policy Evaluation with an Integrated Assessment Model

There has been a recent increase in efforts to develop broader models to assess the impact of climate change and climate change policies, both in terms of impact measures (beyond GDP) and in terms of modelling complexity (beyond DICE/RICE models). Climate policies aimed at reducing CO2 emissions can have impacts in multiple sectors of the economy, and can change consumption levels over time. We show how the sustainability indicator Genuine Savings can be endogenised within a general equilibrium model and used as a criterion for judging the impacts of such policies in terms of future well-being. Differences in Genuine Savings rates between CO2 emission reduction scenarios are discussed. We show how a broader, Genuine Savings-based assessment of climate change can result in a re-evaluation of the consequences and costs of inaction in terms of various climate change-related policies; and how multiple environmental and well-being outcomes can be analysed within a unified modelling framework.

Resource curse contagion in the case of Yemen

This study analyses the economic developments in Yemen from the 1970s to today in the context of the resource curse hypothesis. After a brief survey of the resource curse literature, using empirical data, historical accounts, and political (economic) analyses, I confirm that post-reunification Yemen suffers from an intense oil curse. The curse is evidenced by low genuine savings rates, oil-dependency, a stagnating economy, and institutional failure. However, this study finds that the institutional failure which caused this is itself a product of the resource-curse-like developments following migrant worker remittances from Saudi Arabia in the 1970s and 1980s. Moreover, the current instability in Yemen has its origins in rent-seeking defections in the corrupt governing patronage network due to sudden anticipations of oil exhaustion. The analysis suggests that worker migration is able to transmit resource curse symptoms to other economies, which makes them also more vulnerable to future resource curse triggers, and that declining resource reserves increase political instability of countries with strong patronage networks.

The Zambian Resource Curse and its influence on Genuine Savings as an indicator for “weak” sustainable development

The empirical evidence that economies predominantly reliant on their natural resources are characterized by slower economic growth—the so-called Resource Curse (RC)—is in many ways confirmed by the case of Zambia. Haber and Menaldo (Am Polit Sci Rev 105(1):1–26, 2011) identify Zambia’s extreme dependence on copper exports as one of the worldwide most striking examples for a country suffering from this “curse.” In topical literature, the RC is traced back to the generation of natural resource rents regardless of economic performance, which among other problems leads to suboptimal reinvestment. The World Banks indicator for the “weak” sustainable development of a country—the so-called Genuine Savings (GS)—considers exactly this reinvestment of rents from the depletion of natural capital rents into physical or human capital. Although it has been shown empirically that countries dependent on primary exports on average feature negative GS rates and that the determinants of the RC influence both present economic growth and future sustainability as measured by GS, no case studies have been conducted to confirm this. Against this background, we qualitatively survey the relationship between the most discussed determinants causing the RC in Zambia and the country’s GS rate. We show that all theoretical relationships between the GS rates of a country and RC determinants such as consumption behavior, volatile world market prices, the so-called Dutch disease as well as political and institutional structures apply to Zambia between 1964 and 2010: an extreme dependency on copper exports and insufficient reinvestments of income from the depletion of Zambia’s natural capital constitutes one of the main reasons for slow growth and negative GS until the copper price booms in the second half of the 2000s.

A theoretical overview of the relationship between the resource curse and genuine savings as an indicator for “weak” sustainability

AbstractThis paper shows the strong relation between the factors that lead to the resource curse (RC) and factors that lead to a decline of genuine savings (GS). There is substantial empirical evidence that economies that rely predominantly on their natural resources are also characterized by slower economic growth. This so‐called RC is commonly traced back to the fact that natural resources' generate rents that are independent of a country's economic performance, which can lead to suboptimal reinvestments of this consumed natural capital. We argue that the factors responsible for the RC also have a negative effect on GS, a concept that measures “weak” sustainable development by considering reinvestment of natural capital rents in physical and human capital. We discuss whether the RC hampers possibilities for resource abundant countries to obtain sufficiently high rates of GS, and find indeed many reasons why resource‐dependent countries have problems achieving positive GS rates. We survey both areas of research, emphasizing the influence of the exogenous and endogenous determinants of economic growth, which are usually used to theoretically and empirically explain the RC on the three different forms of capital considered by GS. We specify why most countries suffering from the RC have negative GS rates and explain in detail where the linkages are. This overview could help with potential advancements in the explanation of GS through the inclusion of RC effects.

A numerical study on assessing sustainable development with future genuine savings simulation

This paper presents a numerical examination of sustainability from the perspective of ‘genuine savings’, using a dataset provided by the World Bank. Unlike previously-used criteria of sustainability that focus on observed paths of genuine savings rates, we consider future sustainability by simulating future paths of genuine savings. This analysis shows that some countries that had been classified as being sustainable by previous studies, using observed paths, are in fact, not sustainable from the perspective of future sustainability. We provide information on capital components which should be targeted by policy makers in order to maintain future sustainability.

Global economic sustainability indicator: analysis and policy options for the Copenhagen process

The traditional discussion about CO2 emissions and greenhouse gases as a source of global warming has been rather static, namely in the sense that innovation dynamics have not been considered much. Given the global nature of the climate problem, it is natural to develop a more dynamic Schumpeterian perspective and to emphasize a broader international analysis, which takes innovation dynamics and green international competitiveness into account: We discuss key issues of developing a consistent global sustainability indicator, which should cover the crucial dimensions of sustainability in a simple and straightforward way. The basic elements presented here concern genuine savings rates—covering not only depreciations on capital, but on the natural capital as well—, the international competitiveness of the respective country in the field of environmental (“green”) goods and the share of renewable energy generation. International benchmarking can thus be encouraged and opportunities emphasized—an approach developed here. This new EIIW-vita Global Sustainability Indicator is consistent with the recent OECD requirements on composite indicators and thus, we suggest new options for policymakers. The US and Indonesia have suffered from a decline in their performance in the period 2000–07; Germany has improved its performance as judged by the new composite indicator whose weights are determined from factor analysis. The countries covered stand for roughly 91% of world GDP, 94% of global exports, 82% of global CO2 emissions and 68% of the population.

A Numerical Study on Assessing Sustainable Development with Future Genuine Savings Simulation

This paper presents a numerical examination of sustainability from the perspective of Genuine Savings, using a data set provided by the World Bank. Unlike previously-used criteria of sustainability that focuses on observed paths of genuine savings rates, we consider future sustainability by simulating future paths of genuine savings. This analysis shows that some countries that had been classified as being sustainable by previous studies, using observed paths, are, in fact, not sustainable from the perspective of future sustainability. We provide information on capital components which should be targeted by policymakers in order to maintain future sustainability.

Empirical measurement of sustainable welfare from the perspective of extended genuine savings

AbstractThe original genuine savings (GS) model started from a concern mainly with unchanged capital: if the stocks of all forms of capital decline through time, welfare will decline, too, eventually leading to unsustainability. In other words, negative GS rates indicate unsustainability. In the context of sustainable development evaluation, however, income distribution and change of per capita welfare are two significant dimensions that the GS model has totally ignored and that need to be aptly incorporated into the model. This is because, behind a positive GS ratio, a country still faces other factors such as current income inequality and population growth, which may undermine the enjoyable sustainable welfare. This paper therefore adjusts the GS framework for these reflections and tests its application to the United Kingdom and Taiwan between 1970 and 1998. Our result shows that the United Kingdom has more depressed GS rates and more eminent sustainable welfare loss than Taiwan over the years. This result has been accordant with some prior research claims: many resource‐rich countries have achieved slow or no long‐term improvements in their standards of living. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.

GENUINE SAVINGS MEASUREMENT AND ITS APPLICATION TO THE UNITED KINGDOM AND TAIWAN

The genuine savings index (GSI) is a simple indicator that can be used to assess an economy's sustainability. It defines wealth more broadly than orthodox national accounts, and recalculates national savings figures based on this new definition. Genuine savings aim to represent the value of the net change in the whole range of assets that are important for development: produced assets, natural resources, environmental quality, and human resources. This paper takes the broad framework developed in previous studies and tests its application with respect to the United Kingdom and Taiwan between 1970 and 1998, with the goal of assessing the feasibility of using such measures quite broadly as indices of sustainable development. The paper shows that both the United Kingdom and Taiwan have positive genuine savings rates over the period in question, with the United Kingdom registering lower ones than Taiwan.

Pilot Indices of Genuine Savings for the UK and Taiwan, From 1970 to 1998

Genuine Savings Index (GSI) is a simple indicator to assess an economy's sustainability. It defines wealth more broadly than orthodox national accounts, and recalculates national savings figures based on this new definition. Genuine Savings (GS) aim to represent the value of the net change in the whole range of assets that are important for development: produced assets, natural resources, environmental quality, and human resources. This paper takes the broad framework developed earlier and tests its application to two countries, The UK and Taiwan, between the years 1970 and 1998 with the goal of assessing the feasibility of using such measures quite broadly as indices of sustainable development (SD). It shows both the UK and Taiwan have positive GS rates over the years, but the UK has relatively lower ones. Sources of data and methodological factors are discussed, national comparability is investigated, and the policy uses derived from the exercise are analyzed.

Genuine Savings Rates in Developing Countries

In this paper, genuine savings rates in developing countries, a formal model of green national accounting demonstrates that 'genuine' saving, net saving less the value of resource depletion and environmental degradation, is a useful indicator of sustainability. Country-level and regional calculations of genuine savings are presented for the period 1970-1993. Sub-Saharan Africa stands out as the region where the greatest dissipation of wealth is occurring. After developing the basic theory of genuine savings, this paper presents empirical estimates for developing countries. These calculations account for resource depletion and carbon dioxide emissions, using consistent time series data for the period 1970-93. The paper concludes with a discussion of the policy issues raised by greener national accounting.

Measuring sustainable development: progress on indicators

ABSTRACTThe search for sustainability indicators should be guided by a theory of sustainable development (SD). In this paper we investigate two such theoretical frameworks and the indicators that they suggest. Indicators associated with weak sustainability are characterized by aggregative indicators such as green national income. We conclude, however, that a more promising offshoot of green accounting is measures of genuine savings (i.e. savings adjusted for loss of assets). To achieve SD, genuine savings rates must not be persistently negative. Strong sustainability indicators accord a more central role to the conservation of critical natural assets within the broader goal of prudently managing a nation's portfolio of assets over time. We discuss two approaches—carrying capacity and resilience—and conclude that, while measures of resilience are potentially attractive, more research is required regarding the resilience–SD link. However, an important conclusion that we can make is that, even in an economy operating under a strong sustainability regime, genuine savings are still key indicators of SD and are complementary to measures of changes in stocks of critical natural assets.