Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27488
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dc.contributor.authorGollier, Christianen_US
dc.date.accessioned2009-08-12T07:15:04Z-
dc.date.available2009-08-12T07:15:04Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/27488-
dc.description.abstractIn this paper, we elaborate on an idea initially developed by Weitzman (1998) that justifies taking the lowest possible discount rate for far-distant future cash flows. His argument relies on the arbitrary assumption that when the future rate of return of capital (RRC) is uncertain, one should invest in any project with a positive expected net present value. We examine an economy with a risk-averse representative agent facing an uncertain evolution of the RRC. In this context, we characterize the socially efficient stochastic consumption path, which allows us in turn to use the Ramsey rule to characterize the term structure of socially efficient discount rates. We show that Weitzman's claim is qualitatively correct if shocks on the RRC are persistent. On the contrary, in the absence of any serial correlation in the RRC, the term structure of discount rates should be flat.en_US
dc.language.isoengen_US
dc.publisher|aKiel Institute for the World Economy (IfW) |cKiel-
dc.relation.ispartofseries|aEconomics Discussion Papers / Institut für Weltwirtschaft |x2009-7en_US
dc.subject.jelE43en_US
dc.subject.jelQ51en_US
dc.subject.jelG12en_US
dc.subject.ddc330en_US
dc.subject.keywordDiscount rateen_US
dc.subject.keywordterm structureen_US
dc.subject.keywordcertainty equivalent rateen_US
dc.subject.keywordRamsey ruleen_US
dc.subject.keywordsustainable developmenten_US
dc.subject.stwSoziale Diskontrateen_US
dc.subject.stwZinsstrukturen_US
dc.subject.stwOptimales Wachstumen_US
dc.subject.stwNachhaltige Entwicklungen_US
dc.subject.stwTheorieen_US
dc.titleShould We Discount the Far-Distant Future at Its Lowest Possible Rate?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn589828975en_US
dc.rights.licensehttp://creativecommons.org/licenses/by-nc/2.0/de/deed.en-
dc.identifier.repecRePEc:zbw:ifwedp:7486-

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