Discounting and the Social Time Preference Rate
AbstractThis paper shows that the emphasis on a social time preference rate (defined as the sum of a pure time preference rate and the product of the elasticity of marginal valuation and the growth rate) in social evaluations where money values are discounted using the social time preference rate, is not advisable. It can give an entirely different, and arbitrary, ranking of alternative streams compared with the direct use of the pure time preference rate to discount ‘social welfare’ in each period (where social welfare is a — usually isoelastic — function of money values).
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 989.
Length: 12 pages
Date of creation: 2007
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
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