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Title:Discounting the long-distant future: a simple explanation for the Weitzman-Gollier-puzzle PDF Logo
Authors:Buchholz, Wolfgang
Schumacher, Jan
Issue Date:2008
Series/Report no.:CESifo working paper 2357
Abstract:In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the long-run future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom (2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome, i.e. a discount rate that is declining over time, is nevertheless reasonable, since it can be justified by assuming a plausible degree of risk aversion.
Subjects:Discount rates
uncertainty
risk aversion
JEL:D40
E43
Q51
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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