Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93527
Authors: 
Baumgärtner, Stefan
Klein, Alexandra M.
Thiel, Denise
Winkler, Klara
Year of Publication: 
2013
Series/Report no.: 
University of Lüneburg Working Paper Series in Economics 281
Abstract: 
Most ecosystem services, which are essential for human well-being, are globally declining, while the production of consumption goods, measured by GDP, is still growing. To adequately account for this opposite development in public cost-benefit analyses, it has been proposed - based on a two-goods extension of the Ramsey growth model - to apply good-specific discount rates for manufactured consumption goods and for ecosystem services. Using empirical data for ten ecosystem services across five countries and the world at large, we estimated the difference between the discount rates for ecosystem services and for manufactured consumption goods. In a conservative estimate, we found that ecosystem services in all countries should be discounted at rates that are significantly lower than the ones for manufactured consumption goods. On global average, ecosystem services should be discounted at a rate that is 0.9-0.3 %-points lower than the one for manufactured consumption goods. The difference is larger in less developed countries and smaller in more developed countries. This result supports and substantiates the suggestion that public cost-benefit-analyses should use country-specific dual discount rates - one for manufactured consumption goods and one for ecosystem services.
Subjects: 
discounting
ecosystem services
(de)growth
heterogeneous consumption
Ramsey model
substitution
JEL: 
H43
Q28
Q51
Q57
Document Type: 
Working Paper

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