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Discounting in a world of limited growth

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  • Thomas Sterner

Abstract

This paper explores the consequences fordiscounting of assuming limits to growth. One of the main determinants of the discount rate is the rate of economic growth. If growth rates decline in the future then the discount rate should not be constant but also decline over time. In fact, we would then need not a single discount rate but rather a variable discount schedule. This would imply higher present values for the distant future. The paper analyses how discount rates would vary with different assumptions about the patterns of growth and the pure rate of time preference. Copyright Kluwer Academic Publishers 1994

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File URL: http://hdl.handle.net/10.1007/BF00691927
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 4 (1994)
Issue (Month): 5 (October)
Pages: 527-534

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Handle: RePEc:kap:enreec:v:4:y:1994:i:5:p:527-534

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Discount; logistic growth; limits; present value;

References

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  1. C. Price, 1991. "Do High Discount Rates Destroy Tropical Forests," Journal of Agricultural Economics, Wiley Blackwell, vol. 42(1), pages 77-85.
  2. Robert Ayres & Jörg Walter, 1991. "The greenhouse effect: Damages, costs and abatement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 1(3), pages 237-270, September.
  3. Nick Hanley, 1992. "Are there environmental limits to cost benefit analysis?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 2(1), pages 33-59, January.
  4. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(407), pages 920-37, July.
  5. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
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Cited by:
  1. Horowitz, John K., 1996. "Environmental policy under a non-market discount rate," Ecological Economics, Elsevier, vol. 16(1), pages 73-78, January.
  2. Hansen, Anders Chr., 2006. "Do declining discount rates lead to time inconsistent economic advice?," Ecological Economics, Elsevier, vol. 60(1), pages 138-144, November.
  3. Azar, Christian & Sterner, Thomas, 1996. "Discounting and distributional considerations in the context of global warming," Ecological Economics, Elsevier, vol. 19(2), pages 169-184, November.
  4. Philibert, Cedric, 1999. "The economics of climate change and the theory of discounting," Energy Policy, Elsevier, vol. 27(15), pages 913-927, December.
  5. Christian Azar, 1998. "Are Optimal CO 2 Emissions Really Optimal?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 11(3), pages 301-315, April.
  6. Saez, Carmen Almansa & Requena, Javier Calatrava, 2007. "Reconciling sustainability and discounting in Cost-Benefit Analysis: A methodological proposal," Ecological Economics, Elsevier, vol. 60(4), pages 712-725, February.
  7. Almansa Sáez, Carmen & Calatrava Requena, Javier, 2007. "La Problemática Del Descuento En La Evaluación Económica De Proyectos Con Impacto Intergeneracional: Tasa Ambiental Crítica Y Montante De Transferencia Intergeneracional/Discounting In The Context Of ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 25, pages 165-198, Abril.
  8. Hultkrantz, Lars & Krüger, Niclas & Mantalos , Panagiotis, 2012. "Risk-adjusted long term social rates of discount for transportation infrastructure investment," Working Papers, Örebro University, School of Business 2012:14, Örebro University, School of Business.

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