Discount Rates and the Distribution of Lifetime Earnings

Keith Hancock and Sue Richardson

Journal of Human Resources, 1985, vol. 20, issue 3, 346-360

Abstract: The logic of human capital theory implies that the present values of lifetime earnings are computed using the discount rate applied by individuals when making their labor market choices. Further, inequalities will appear when higher or lower discount rates are applied. Our empirical tests confirm that there is a discount rate (of around 10 percent) which minimizes differences in lifetime earnings. A further inference-that there is a negative correlation between two rankings of lifetime earnings when these rankings are computed using discount rates which are, respectively, lower and higher than "the" rate-is also supported empirically.

Date: 1985
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.jstor.org/stable/pdfplus/145886
A subscription is required to access pdf files. Pay per article is available.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uwp:jhriss:v:20:y:1985:i:3:p:346-360

Access Statistics for this article

More articles in Journal of Human Resources from University of Wisconsin Press
Bibliographic data for series maintained by ().