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Global macroeconomic sustainability: a dynamic general equilibrium approach

Published online by Cambridge University Press:  01 February 2000

RALPH W. BAILEY  and
ROSEMARY CLARKE
RALPH W. BAILEY
Affiliation:
Department of Economics, Edgbaston, University of Birmingham, BIRMINGHAM B15 2TT Tel (0) 121 414 6640 fax (0) 121 414 7377 Email: [email protected]; [email protected]
ROSEMARY CLARKE
Affiliation:
Department of Economics, Edgbaston, University of Birmingham, BIRMINGHAM B15 2TT Tel (0) 121 414 6640 fax (0) 121 414 7377 Email: [email protected]; [email protected]
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Abstract

Previous empirical studies assessing sustainability have adopted the weak sustainability indicator (WSI) which measures changes in the stock of physical and natural capital. Whereas these studies have been retrospective, we use a dynamic general equilibrium model to investigate global and regional sustainability over the period 1985–2050, focusing on fossil fuel extraction. Our standard scenario predicts increasing WSI values suggesting global sustainability in all periods to 2050 as, despite a rising world oil price, the introduction of backstop fuels in 2010 provides an alternative source of energy. A more pessimistic scenario examines possible outcomes in the absence of energy saving technological change and backstops fuels. WSI values still indicate global sustainability, though economic growth is only half that predicted by the more optimistic model, and two countries—USA and Brazil—are unsustainable.

Type
Research Article
Information
Environment and Development Economics , Volume 5 , Issue 1 , February 2000 , pp. 177 - 194
Copyright
© 2000 Cambridge University Press

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Footnotes

We are grateful to the Economic and Social Research Council (contract L 320 253 199) for financing this research, to Roger Backhouse, Paul Brenton, Lucy O’Shea, Charles Perrings, Thomas Renstrom, and Cillian Ryan for helpful discussion, to three anonymous referees for useful suggestions, and to Alan Reed and Alexander Smith for programming assistance.