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Discounting, Risk and Inequality: A General Approach

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  • Marc Fleurbaey

    ()
    (Woodrow Wilson School and Center for Human Values - Princeton University)

  • Stéphane Zuber

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

Abstract

The common practice consists in using a unique value of the discount rate for all public investments. Endorsing a social welfare approach to discounting, we show how different public investments should be discounted depending on: the risk on the return of the investment, the systematic risk on aggregate consumption, the distribution of gains and losses, and inequality. We also study the limit value of the discount rate for very long term investments, and the type of information that is needed about long-term scenarios in order to evaluate investments.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00973471.

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Date of creation: Mar 2014
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Handle: RePEc:hal:cesptp:halshs-00973471

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Related research

Keywords: Social discounting; risk; inequality;

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  18. Antony Millner, 2013. "On Welfare Frameworks and Catastrophic Climate Risks," CESifo Working Paper Series 4442, CESifo Group Munich.
  19. Gollier, Christian, 2002. "Discounting an uncertain future," Journal of Public Economics, Elsevier, vol. 85(2), pages 149-166, August.
  20. Broome, John, 2006. "Weighing Lives," OUP Catalogue, Oxford University Press, number 9780199297702, Octomber.
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