Capital depreciation and waste accumulation in capital-resource economies

Abstract

In this article, we investigate how the depreciation of a manufactured stock and the related accumulation of a waste stock can alter the optimal path of the capital-resource economy. It is shown that the optimal consumption path is affected by how the disuse pattern of the manufactured stock in question is distributed, specifically with forward-looking terms.

Acknowledgement

A portion of the article was presented at the Third World Congress of Environmental and Resource Economists (Kyoto). We wish to thank the participants for helpful comments.

Notes

¹A similar forward-looking term is derived in the context of habit formation in Aronsson and Löfgren (2008).