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http://ssrn.com/abstract=1187622
 
 

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Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle


Wolfgang Buchholz


Universitaet Regensburg; CESifo (Center for Economic Studies and Ifo Institute)

Jan Schumacher


University of Regensburg

July 2008

CESifo Working Paper Series No. 2357

Abstract:     
In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the long-run future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom (2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome, i.e. a discount rate that is declining over time, is nevertheless reasonable, since it can be justified by assuming a plausible degree of risk aversion.

Number of Pages in PDF File: 13

Keywords: discount rates, uncertainty, risk aversion

JEL Classification: D40, E43, Q51

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Date posted: July 30, 2008  

Suggested Citation

Buchholz, Wolfgang and Schumacher, Jan, Discounting the Long-Distant Future: A Simple Explanation for the Weitzman-Gollier-Puzzle (July 2008). CESifo Working Paper Series No. 2357. Available at SSRN: http://ssrn.com/abstract=1187622

Contact Information

Wolfgang Buchholz (Contact Author)
Universitaet Regensburg ( email )
D-93040 Regensburg
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Jan Schumacher
University of Regensburg ( email )
93040 Regensburg
D-93040 Regensburg
Germany
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