Sustainable development in a natural resource rich economy: The case of Chile in 1985-2004

Searching for practical means to assessing economic growth's sustainability, we extend a standard theoretical model to calculate ?true? income measures for Chile, during the 1985_2004 period, and use estimates of natural capital depreciation to obtain genuine national saving measures. We found that, for the period, Chile's economic growth was sustainable, even when approximately 2.5% of the income recorded by national accounts corresponded to depreciation of natural resources plus costs of atmospheric pollution. This performance can be partially explained by policies implemented to force fiscal responsibility and to assure wise public investment and expending during a natural resource driven growth. This evidence reinforces recent findings contradicting the natural resource curse, and the indirect negative effect of resource abundance over growth that would operate through the quality of institutions.