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(The Economics of) Discounting: Unbalanced Growth, Uncertainty, and Spatial Considerations

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  • Thomas Sterner

    ()

  • Efthymia Kyriakopoulou

    () (Department of Economics, University of Gothenburg, Gothenburg 40530, Sweden)

Abstract

The economics of climate change and the various measures that should be implemented to reduce future damages are highly tied to the use of cost-benefit analysis. Traditional approaches ignore the fact that environmental amenities do not experience the same growth rate as do most of the sectors in the economy, which leads to changing relative prices. Uncertainty should also be considered, especially when one is conducting cost-benefit analysis involving the long-run damages from climate change. This article reviews some theoretical approaches to the economics of discounting and discusses issues associated with unbalanced growth, uncertainty, and spatial discounting.

Suggested Citation

  • Thomas Sterner & Efthymia Kyriakopoulou, 2012. "(The Economics of) Discounting: Unbalanced Growth, Uncertainty, and Spatial Considerations," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 285-301, August.
  • Handle: RePEc:anr:reseco:v:4:y:2012:p:285-301
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-110811-114507
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    More about this item

    Keywords

    relative prices; unbalanced growth; spatial discounting; environmental amenities; cost-benefit analysis;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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