Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Public Economics - Theory II C14-V1
I revisit the consumption discount rate for a novel combination of standard assumptions. To disentangle risk and time preferences, I consider a decision maker with recursive preferences la Kreps and Porteus (1978). Moreover I assume that preferences are mutually utility independent in the sense of Koopmans (1960). In an in finite horizon setting with independent growth risk and constant elasticity of substitution, the consumption discount rate is diminished by a previously unrecognised horizon effect. This effect may be signifi cant if the rate of pure time preference is moderately small.