publication . Article . Research . 2002

Discounting an uncertain future

Christian Gollier;
Open Access
  • Published: 11 Oct 2002 Journal: Journal of Public Economics, volume 85, pages 149-166 (issn: 0047-2727, Copyright policy)
  • Publisher: Elsevier BV
Abstract
Abstract The objective of this paper is to determine the socially optimal discount rate for public investment projects that entail costs and benefits in the very long run. We suppose that there is an exogenous process for the growth of consumption per capita, which is stochastic. We first evaluate the determinants of the discount rate for a specific horizon when the representative agent has a recursive utility. We then explore the influence of the time horizon in the expected utility model. Under various conditions on preferences, as positive prudence, decreasing relative risk aversion or decreasing absolute risk aversion, we prove that (1) the fact that growth ...
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Subjects
free text keywords: D81, D91, Q25, Q28, Discounting, Uncertain growth, Log-supermodularity, Prudence, Kreps-Porteus preference, Soziale Diskontrate, Öffentliche Investition, Erwartungsnutzen, Wirtschaftswachstum, Risiko, Theorie, Stochastic discount factor, Futures contract, Microeconomics, Discounting, Representative agent, Risk aversion, Expected utility hypothesis, Economics, Time horizon, Per capita, ddc:330
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