activities; (iii) pollution damages from carbon dioxide and particulate emissions<sup>20</sup> are deducted to account for the long-term cost of environmental degradation; and (iv) current expenditures on education are added as a proxy for the positive impact of human-capital formation on long-term growth. Intangible capital is not surprisingly the most difficult component to measure and is ultimately calculated as a residual after subtracting other forms of capital from an estimation of the total value of capital.<sup>21</sup> The advantage of this measure is that it enables an assessment of the extent to which current depletion of natural resources is balanced by the natural resource rents and changes in human and man-made capital. This has important implications for long-term consumption and intergenerational equity in the exploitation of natural resources. However, it is only a snapshot at one point in time and does not take into account the probability of new discoveries.

**A large literature on ANS rates has revealed a troubling trend among resource-rich countries in SubSaharan Africa (SSA), where high GDP growth rates often obscure a decline in the underlying stock of natural capital.** While some countries have been able to effectively transform their natural assets into produced and human capital, in many cases the exploitation of natural wealth has fueled an unsustainable increase in present expenditure on consumption or low-productivity investment, at the expense of long-term growth.<sup>22</sup> Moreover, the available data indicate a general correlation between negative adjusted savings rates and persistently low indicators of socioeconomic development, such as literacy rates, nutrition levels and public health outcomes.<sup>23</sup>

**Given the major role that natural resources play in the growth of the Mauritanian economy, the following analysis focuses primarily on natural capital.** Mauritania’s stock of natural capital can be broken down into six categories, which together represent the majority of the country’s renewable and nonrenewable resources. These are: iron ore, gold ore, natural gas, crude oil, fisheries and livestock pastureland. The analysis is designed to calculate the depletion of each of these forms of natural capital.

**The first step is to calculate resource rents (RR) for each category of capital, which reflect the net current income derived from renewable and nonrenewable resources.** For extractive resources RR can be defined as the total revenue from gross resource sales minus all costs incurred in the extraction process—including the opportunity cost of produced capital—adjusted for inflation. The value of RR is projected over a period of 25

> 20 In the impossibility of identifying/estimating updated figures on pollution costs, this analysis interpolated path values based on the estimates available for the period 1997-2010 and predicted an estimate for 2013 (historical estimates on particulates emissions are provided by WB’s WDI).

> 21 See Annex 2 for more details.  Since the value of cropland could not be estimated separately, it is also included in this residual.

> 22 See Collier, P., R. Van Der Ploeg, M. Spence and A. Venables (2010) “Managing Resource Revenues in Developing Economies,” _IFM Staff Papers_ 57:84-118 Washington DC: IMF

> 23 See Hamilton, K. and E. Ley (2010), “Measuring National Income and Growth in Resource-Rich, Income-Poor Countries,” _Economic Premise_ n.28, Washington DC: The World Bank.

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