Description

The optimal exploitation of the natural resource base is crucial to attain maximum social welfare, especially in developing countries whose economies are highly dependent on such resources. This paper presents a simple model to correct the Gross Domestic Product (GDP) to obtain a measure of economic income, by subtracting from the Net National Product (NNP) the depreciation of natural capital. Corrected measures of the economic income for the period 1985-1997 are presented, taking into consideration mining and fishing resources and air contamination. The results show that approximately 3% of Chile’s economic income correspond to depreciation of its natural resources plus the cost of atmospheric pollution. In addition, genuine measures of saving are calculated. The results lead to the conclusion that economic growth was sustainable during the period 1985-1997. Important policy implications are obtained for a better management of natural resources in the future.