Aggregation of Discount Rates: an Equilibrium Approach
AbstractWe address the problem of a social planner who, as in Weitzman (2001), gathers data on experts' discount rates and wants to infer the socially efficient consumption discount rate. We propose an 'equilibrium approach' and we analyse the expression and the properties of the resulting 'equilibrium discount rate'. We compare our expression for the discount rate with the different expressions that have been previously proposed in the literature. We analyse the impact of shifts in the distributions of experts discount rates. Finally, we apply our approach to Weitzman (2001)'s data to propose discount rates for public sector Cost-Benefit Analysis, in particular for the long term.
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Date of creation: Jul 2008
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consumption discount rate; equilibrium discount rate; experts discount rate; hyperbolic discounting; cost-benefit analysis; gamma discounting; divergence of opinion.;
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