TY  - JOUR
ID  - publications22383
UR  - http://tse-fr.eu/pub/30897
A1  - Gollier, Christian
Y1  - 2016/10//
N2  - Weitzman (1998, 2001) proposed a simple “gamma discounting” method to characterize the term structure of discount rates today from the sole distribution of future spot interest rates. This rule which justifies using a smaller discount rate for longer maturities is now used for long-term policy evaluations in the UK, France, Norway, and potentially in the US. But we show that there is no social preference within the discounted expected utility framework that generically supports this pricing model and its underlying criterion, the expected net present value rule. Considering a standard Lucas tree economy, we characterize the term structure from the joint distribution of future spot interest rates and future consumption levels. When future growth rates are serially correlated, efficient discount rates today are decreasing with maturity, and the gamma discounting rule yields discount rates that are larger than the efficient ones.
PB  - Elsevier
JF  - Journal of Public Economics
VL  - 142
KW  - decreasing discount rates
KW  - term structure
KW  - uncertain growth
KW  - Weitzman-Gollier puzzle
SN  - 0047-2727
TI  - Gamma discounters are short-termist
SP  - 83
AV  - public
EP  - 90
ER  -