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Journal Article

Strong Sustainability, Rent and Value-Added Sharing

Jean-François Fagnart, Marc Germain and Alphonse Magnus
Annals of Economics and Statistics
No. 121/122 (June 2016), pp. 309-358
Published by: GENES on behalf of ADRES
DOI: 10.15609/annaeconstat2009.121-122.309
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Page Count: 50
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Strong Sustainability, Rent and Value-Added Sharing
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We reassess Ricardo's conjecture of a secular increase in rent in an endogenous growth model with an essential renewable material resource and rising product quality. The model is consistent with the concept of strong sustainability and thus assumes that the resource productivity is bounded. Hence, only qualitative growth (i.e., a secular increase in the quality of final productions) may persist in the long run. We analyse how the scarcity of the resource affects the rent level and the distribution of national income (between resource, capital and labour) in the short and long runs. In the long run, resource scarcity induces a distributive conflict opposing labour to capital and resource, a lower resource stock implying generally a lower labour share and higher capital and rent shares. The transitory dynamics of the economy is analyzed numerically, starting from initial conditions characterized by a low capital stock and a large potential technical progress. Even if initially the rent share may evolve non-monotonically, simulations tend to confirm that Ricardo's conjecture emerges sooner or later during the transitory dynamics: except in the case of a very high dematerialization potential of final output, the rent share will rise as quantitative growth slows down. JEL: E25, D9, 044, Q0, Q56. / KEY WORDS: Growth, Strong Sustainability, Rent, Functional Distribution of Income, Renewable Resource, Dematerialisation.

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