Intergenerational equity and the discount rate for cost-benefit analysis

Anna Rubinchik () and Jean-François Mertens

No 874, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: A necessary condition is time-invariance, which is satisfied by any common solution concept in an overlapping generations model with exogenous growth. The method is applied to derive the discount rate for cost-benefit analysis under two different utilitarian welfare functions: traditional and relative. It is only under relative utilitarianism that the discount rate is well-defined for a heterogeneous society, is corroborated by an independent argument on the value of human life, and equals the growth rate of per capita consumption, thus falling in the range suggested by the U.S. Office of Management and Budget.

Date: 2008
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Related works:
Working Paper: Intergenerational equity and the discount rate for cost-benefit analysis (2008)
Working Paper: Intergenerational equity and the discount rate for cost-benefit analysis (2008)
Working Paper: Intergenerational equity and the discount rate for cost-benefit analysis (2006)
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