English, Article, Journal or magazine article edition: Intergenerational equity and the discount rate for cost-benefit analysis Jean-Franois, MERTENS; Anna, RUBINCHIK

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Bookmark: http://trove.nla.gov.au/version/177702
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Intergenerational equity and the discount rate for cost-benefit analysis
Author
  • Jean-Franois, MERTENS
  • Anna, RUBINCHIK
Physical Description
  • preprint
Notes
  • For two independent principles of intergenerational equity, the implied discount rate equals the growth rate of real per-capital income, say 2%, thus falling right into the range suggested by the U.S. Office of Management and Budget. To prove this, we develop a simple tool to evaluate small policy changes affecting several generations, by reducing the dynamic problem to a static one. A necessary condition is time-invariance, which is statisfied by any common solution concept in an overlapping generations model with exogenous growth. This tool is applied to derive the discount rate for cost-benefit analysis under two different utilitarian welfare functions : classical and relative. It is only with relative utilitarianism that the discount rate is well-defined for a heterogeneous society, is corroborated by an independent principle equation values of human lives, and equals the growth rate of real per-capital income
  • Social welfare function; social welfare functional; overlapping generations; exogenous growth; policy reform; intergenerational equity; intergenerational fairness; cost-benefit analysis; discount rate; social discount rate; utilitarianism; relative utilitarianism; welfarism
  • RePEc:ctl:louvec:2008047
Language
  • English
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