Discounting, Inequality and Economic Convergence

Gollier, Christian (2015) Discounting, Inequality and Economic Convergence. Journal of Environmental Economics and Management, vol.69. pp. 53-61.

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Official URL: http://tse-fr.eu/pub/29100

Abstract

The aim of this paper is to examine the impact of inequalities and economic convergence on the efficient discount rate when international credit and risk-sharing markets are inefficient. We consider an economy in which initial consumption levels and growth expectations are heterogeneous. In the benchmark case in which relative inequalities are permanent and relative risk aversion is constant, inequalities do not affect the discount rate. We derive necessary and sufficient conditions under which permanent inequalities reduce the discount rate. We also show that the anticipation of economic convergence raises the efficient discount rate when relative prudence is larger than unity.

Item Type: Article
Language: English
Date: January 2015
Refereed: Yes
Uncontrolled Keywords: Prudence, Concordance, Discount rate, Climate change
JEL codes: E43 - Determination of Interest Rates; Term Structure of Interest Rates
G11 - Portfolio Choice; Investment Decisions
G12 - Asset Pricing; Trading volume; Bond Interest Rates
Q54 - Climate; Natural Disasters
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:56
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:29100
URI: http://publications.ut-capitole.fr/id/eprint/16713

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