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Discounting, Risk and Inequality: A General Approach

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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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  • Marc Fleurbaey & Stéphane Zuber, 2014. "Discounting, Risk and Inequality: A General Approach," Documents de travail du Centre d'Economie de la Sorbonne 14015, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:14015
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    Cited by:

    1. Fleurbaey, Marc & Zuber, Stéphane, 2015. "Discounting, beyond utilitarianism," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 9, pages 1-52.
    2. repec:eee:matsoc:v:87:y:2017:i:c:p:94-102 is not listed on IDEAS
    3. Loïc Berger & Johannes Emmerling, 2017. "Welfare as Simple(x) Equity Equivalents," Working Papers 2017.14, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Social discounting; risk; inequality;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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