Green national accounting: the case of Chile's mining sector

Abstract

This article uses the welfare foundations for the usual net domestic product (NDP) income measure of the traditional National Accounts System (NAS) provided by Weitzman (1976Weitzman ( , 2000, and the propositions of Hartwick (1993) andHamilton (1994a) to correct this measure in order to obtain a green (sustainable) measure of economic income. It estimates green measures of the economic income of Chile's mining sector for the period 1977-1996. Different methodologies regarding the valuation of mining resources are employed, and exploration expenditures in the mining sector are included to empirically estimate the green measures of income. The results clearly show that the usual income measures of the traditional NAS overestimated the economic income generated by the Chilean mining sector during the period by 20-40 per cent, and its rate of growth by 3-20 per cent. Moreover, this overestimation has increased in recent years. These empirical results are remarkably similar when different methodologies are used to calculate green measures of the mining sector's economic income. The empirical evidence produced in this work, together with the one provided by other studies, leads to the conclusion that Chile's outstanding recent economic growth has not delivered the amount of economic income recorded by its NAS, since a significant part of it corresponded to depreciation of the country's natural capital.

Contention and Ambiguity: Mining and the Possibilities of Development

“…Thus in Chile, one of the banner countries for the ‘mining leads to development’ argument, conventional accounting measures suggest that mining contributed between 7 and 9 per cent of the country's GDP during the first half of the 1990s. However, environmental economists from the University of Chile and Chile's National Commission for the Environment concluded that such accounting methods ‘overestimated the economic income generated by the Chilean mining sector… by 20–40 per cent’ (Figueroa et al, 2002: 215), even when only factoring in the costs of resource depletion. Had additional environmental and health effects of mining, such as air or water pollution, also been included then the overestimation would have been greater still.…”

Sustainable development in a natural resource rich economy: the case of Chile in 1985–2004

“…This in spite that resource depletion should be valued using the long run equilibrium net price resulting from an intertemporal maximization process. However, the approach followed by Gómez-Lobo (1991), Nuñez (1992), and Figueroa et al (2002) is employed here, valuing with a unit rent of a base year. The unit rent (net price) for each natural resource included was calculated from the data of the 1986 Input-Output Matrix, according to the following formula:…”

Environment and development economics 20 years on

“…The study showed that the standard approach overestimated the income generated by the Chilean mining sector during the period by between 20 and 40 per cent, and its rate of growth by between 3 and 20 per cent. Moreover, the bias was similar for the different methodologies used (Figueroa et al, 2002). There have also been studies of the effect of including positive production externalities.…”