Comprehensive Wealth and Future Consumption: Accounting for Population Growth

Posted: 7 Jul 2008

See all articles by Susana Ferreira

Susana Ferreira

University of Georgia

Kirk Hamilton

World Bank

Jeffrey R. Vincent

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

Date Written: 2008

Abstract

Economic theory predicts that the current change in national wealth, broadly defined to include natural and human capital as well as produced capital (“genuine savings”), determines whether the present value of future changes in consumption is positive or negative. Theoretical research has focused on the effects of population growth on this relation, but no rigorous empirical investigation has been conducted. Panel data for 64 developing countries during 1970-82 are used to test the effects of three adjustments for population growth, including one that controls for omitted wealth. Although the adjustments have substantial impacts on estimates of genuine savings, they lead to only limited improvements in the relation between those estimates and subsequent consumption changes. Even without adjustments for population growth, adjustments for natural resource depletion improve the relation significantly. Policymakers and economists can interpret published estimates of genuine savings as signals of future consumption paths if and only if the estimates include adjustments for natural resource depletion. But better estimates of capital stocks are needed before it can be confidently said that adjustments for population growth significantly improve the accuracy of those signals.

Keywords: O40, Q01, C33

Suggested Citation

Ferreira, Susana and Hamilton, Kirk and Vincent, Jeffrey R., Comprehensive Wealth and Future Consumption: Accounting for Population Growth (2008). The World Bank Economic Review, Vol. 22, Issue 2, pp. 233-248, 2008, Available at SSRN: https://ssrn.com/abstract=1156198 or http://dx.doi.org/lhn008

Susana Ferreira (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Kirk Hamilton

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Jeffrey R. Vincent

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
434
PlumX Metrics