Strong Sustainability, Rent and Value-Added Sharing

We reassess Ricardo’s conjecture of a secular increase in rent in an endogenous growth model with an essential renewable material resouce 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 of 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 raise as quantitative growth slows down