How Substitutable Is Natural Capital?

One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources su...

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Main Authors:	Markandya, Anil, Pedroso-Galinato, Suzette
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE VALUE ACCOUNTABILITY ACCOUNTING AMOUNT OF LAND ASSETS CAPITAL INPUT CAPITAL-LABOR CO2 CONSTANT ELASTICITY CROSS-SECTION DATA DEPENDENT VARIABLE ECONOMETRIC ANALYSIS ECONOMIC EFFECTS ECONOMIC FACTORS ECONOMIC FRAMEWORK ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC REVIEW ECONOMIC STUDIES ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ESTIMATION EMPIRICAL WORK EXPLANATORY VARIABLES EXPORTS FACTOR DEMAND FINANCIAL DEPTH FINANCIAL DEVELOPMENT FUNCTIONAL FORM FUNCTIONAL FORMS GDP GROSS OUTPUT HUMAN CAPITAL INCOME INCOME PER CAPITA INSTITUTIONAL DEVELOPMENT INSURANCE LABOR INPUT LABOR PRODUCTIVITY LEVEL OF OUTPUT LEVELS OF CAPITAL LOW INCOME MACROECONOMICS MARKET VALUE MATHEMATICAL ECONOMICS NATIONAL INCOME NATURAL RESOURCES NEGATIVE ELASTICITY NEOCLASSICAL MODEL POLICY RESEARCH POLITICAL INSTABILITY POSITIVE IMPACT PRESENT VALUE PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PROPORTIONAL CHANGE REGRESSION RESULTS RELATIVE PRICES RENEWABLE ENERGY SIGNIFICANT CORRELATION SIGNIFICANT IMPACT SIGNIFICANT RELATIONSHIP SUBSTITUTION RESPONSES WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2006/01/6523016/substitutable-natural-capital http://hdl.handle.net/10986/8827

id	okr-10986-8827
recordtype	oai_dc
spelling	okr-10986-88272021-04-23T14:02:40Z How Substitutable Is Natural Capital? Markandya, Anil Pedroso-Galinato, Suzette ABSOLUTE VALUE ACCOUNTABILITY ACCOUNTING AMOUNT OF LAND ASSETS CAPITAL INPUT CAPITAL-LABOR CO2 CONSTANT ELASTICITY CROSS-SECTION DATA DEPENDENT VARIABLE ECONOMETRIC ANALYSIS ECONOMIC EFFECTS ECONOMIC FACTORS ECONOMIC FRAMEWORK ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC REVIEW ECONOMIC STUDIES ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ESTIMATION EMPIRICAL WORK EXPLANATORY VARIABLES EXPORTS FACTOR DEMAND FINANCIAL DEPTH FINANCIAL DEVELOPMENT FUNCTIONAL FORM FUNCTIONAL FORMS GDP GROSS OUTPUT HUMAN CAPITAL INCOME INCOME PER CAPITA INSTITUTIONAL DEVELOPMENT INSURANCE LABOR INPUT LABOR PRODUCTIVITY LEVEL OF OUTPUT LEVELS OF CAPITAL LOW INCOME MACROECONOMICS MARKET VALUE MATHEMATICAL ECONOMICS NATIONAL INCOME NATURAL RESOURCES NEGATIVE ELASTICITY NEOCLASSICAL MODEL POLICY RESEARCH POLITICAL INSTABILITY POSITIVE IMPACT PRESENT VALUE PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PROPORTIONAL CHANGE REGRESSION RESULTS RELATIVE PRICES RENEWABLE ENERGY SIGNIFICANT CORRELATION SIGNIFICANT IMPACT SIGNIFICANT RELATIONSHIP SUBSTITUTION RESPONSES WEALTH One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested constant elasticity of substitution (CES) production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater, implying a fairly high degree of substitutability. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found. 2012-06-22T19:18:53Z 2012-06-22T19:18:53Z 2006-01 http://documents.worldbank.org/curated/en/2006/01/6523016/substitutable-natural-capital http://hdl.handle.net/10986/8827 English Policy Research Working Paper; No. 3803 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ABSOLUTE VALUE ACCOUNTABILITY ACCOUNTING AMOUNT OF LAND ASSETS CAPITAL INPUT CAPITAL-LABOR CO2 CONSTANT ELASTICITY CROSS-SECTION DATA DEPENDENT VARIABLE ECONOMETRIC ANALYSIS ECONOMIC EFFECTS ECONOMIC FACTORS ECONOMIC FRAMEWORK ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC REVIEW ECONOMIC STUDIES ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ESTIMATION EMPIRICAL WORK EXPLANATORY VARIABLES EXPORTS FACTOR DEMAND FINANCIAL DEPTH FINANCIAL DEVELOPMENT FUNCTIONAL FORM FUNCTIONAL FORMS GDP GROSS OUTPUT HUMAN CAPITAL INCOME INCOME PER CAPITA INSTITUTIONAL DEVELOPMENT INSURANCE LABOR INPUT LABOR PRODUCTIVITY LEVEL OF OUTPUT LEVELS OF CAPITAL LOW INCOME MACROECONOMICS MARKET VALUE MATHEMATICAL ECONOMICS NATIONAL INCOME NATURAL RESOURCES NEGATIVE ELASTICITY NEOCLASSICAL MODEL POLICY RESEARCH POLITICAL INSTABILITY POSITIVE IMPACT PRESENT VALUE PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PROPORTIONAL CHANGE REGRESSION RESULTS RELATIVE PRICES RENEWABLE ENERGY SIGNIFICANT CORRELATION SIGNIFICANT IMPACT SIGNIFICANT RELATIONSHIP SUBSTITUTION RESPONSES WEALTH
spellingShingle	ABSOLUTE VALUE ACCOUNTABILITY ACCOUNTING AMOUNT OF LAND ASSETS CAPITAL INPUT CAPITAL-LABOR CO2 CONSTANT ELASTICITY CROSS-SECTION DATA DEPENDENT VARIABLE ECONOMETRIC ANALYSIS ECONOMIC EFFECTS ECONOMIC FACTORS ECONOMIC FRAMEWORK ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC REVIEW ECONOMIC STUDIES ECONOMIC THEORY ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL ESTIMATION EMPIRICAL WORK EXPLANATORY VARIABLES EXPORTS FACTOR DEMAND FINANCIAL DEPTH FINANCIAL DEVELOPMENT FUNCTIONAL FORM FUNCTIONAL FORMS GDP GROSS OUTPUT HUMAN CAPITAL INCOME INCOME PER CAPITA INSTITUTIONAL DEVELOPMENT INSURANCE LABOR INPUT LABOR PRODUCTIVITY LEVEL OF OUTPUT LEVELS OF CAPITAL LOW INCOME MACROECONOMICS MARKET VALUE MATHEMATICAL ECONOMICS NATIONAL INCOME NATURAL RESOURCES NEGATIVE ELASTICITY NEOCLASSICAL MODEL POLICY RESEARCH POLITICAL INSTABILITY POSITIVE IMPACT PRESENT VALUE PRICE CHANGES PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE SECTOR PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTION INPUTS PROPORTIONAL CHANGE REGRESSION RESULTS RELATIVE PRICES RENEWABLE ENERGY SIGNIFICANT CORRELATION SIGNIFICANT IMPACT SIGNIFICANT RELATIONSHIP SUBSTITUTION RESPONSES WEALTH Markandya, Anil Pedroso-Galinato, Suzette How Substitutable Is Natural Capital?
relation	Policy Research Working Paper; No. 3803
description	One of the recurring themes in the sustainability literature has been the legitimacy of using an economic framework to account for natural resources. This paper examines the potential for substituting between different inputs in the generation of income, where the inputs include natural resources such as land and energy resources. A nested constant elasticity of substitution (CES) production function is used to allow flexibility in the estimated elasticities of substitution. Also, with this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater, implying a fairly high degree of substitutability. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship with income generation. No statistically significant relationship between income and any of the institutional indicators was found.
format	Publications & Research :: Policy Research Working Paper
author	Markandya, Anil Pedroso-Galinato, Suzette
author_facet	Markandya, Anil Pedroso-Galinato, Suzette
author_sort	Markandya, Anil
title	How Substitutable Is Natural Capital?
title_short	How Substitutable Is Natural Capital?
title_full	How Substitutable Is Natural Capital?
title_fullStr	How Substitutable Is Natural Capital?
title_full_unstemmed	How Substitutable Is Natural Capital?
title_sort	how substitutable is natural capital?
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/01/6523016/substitutable-natural-capital http://hdl.handle.net/10986/8827
_version_	1764405728161824768

How Substitutable Is Natural Capital?

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