Discounting and Growth. Gollier, C. American Economic Review, 104(5):534–537, May, 2014. ![Discounting and Growth [link]](https://bibbase.org/img/filetypes/link.svg "link")
Paper doi abstract bibtex In a growing economy, the discount rate to evaluate a long-term investment is the minimum rate of expected return that compensates for the increased intergenerational inequalities. Because the growth rate is uncertain, there is a precautionary argument in favor of lowering the discount rate. If shocks to growth are persistent, this is a robust argument for using a smaller discount rate for more distant time horizons. If climate damages are positively correlated with future consumption, a risk premium should be added to the climate discount rate, which could have an increasing term structure.
@article{gollier_discounting_2014,
title = {Discounting and {Growth}},
volume = {104},
issn = {0002-8282},
url = {http://pubs.aeaweb.org/doi/10.1257/aer.104.5.534},
doi = {10.1257/aer.104.5.534},
abstract = {In a growing economy, the discount rate to evaluate a long-term investment is the minimum rate of expected return that compensates for the increased intergenerational inequalities. Because the growth rate is uncertain, there is a precautionary argument in favor of lowering the discount rate. If shocks to growth are persistent, this is a robust argument for using a smaller discount rate for more distant time horizons. If climate damages are positively correlated with future consumption, a risk premium should be added to the climate discount rate, which could have an increasing term structure.},
language = {en},
number = {5},
urldate = {2017-05-23},
journal = {American Economic Review},
author = {Gollier, Christian},
month = may,
year = {2014},
keywords = {DR, Untagged},
pages = {534--537},
}
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