Growth and green income: evidence from mining in Chile

Abstract

This paper estimates the true economic income for the Chilean mining sector, using the welfare foundations for the usual net domestic product (NDP) income measure of the traditional National Accounts System (NAS) provided by [Weitzman, M., 1976. On the welfare significance of national product in a dynamic economy. Quarterly Journal of Economics. 90, 156–162; Weitzman, M., 2000. The linearised Hamiltonian as comprehensible NDP. Environment and Development Economics. 5, 55–68]. The total depletion of natural capital caused by mining is calculated by estimating, on the one hand, the depreciation of resources (using the net price approach) and, on the other, the environmental costs provoked by mining activity. The results show that, correcting the usual GDP measure for man-made capital depreciation plus the total loss of natural capital, the standard mining GDP measure of the NAS overestimates by 31–36% the economic income generated by Chile’s mining sector during the period 1985–1996.