Discounting under inequality and lobbyists disagreement

Mahdi Mousavi and Mahdi Kohan Sefidi

Papers from arXiv.org

Abstract: The appropriate discount rate for evaluating policies is a critical consideration in economic decision-making. This paper presents a new model for calculating the derived discount rate for a society that includes different groups with varying desirable discount rates. The model takes into account equality in society and is designed to be used by social planners. The derived discount rate is a useful tool for examining the social planner's approach to policies related to the future of society. If the discount rate is determined correctly, it can help determine the amount of growth and equality in society, as well as the level of attention paid to long-term public projects. The model can be customized for different distributions of wealth and discount rates, allowing researchers to extract desired results. Analysis of the model shows that when equality in society is considered, the derived discount rate is lower than the result obtained using Hamilton's method. Social planners must consider that this may increase disagreement in more consuming groups of society at first.

Date: 2025-02
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