Discounting and Expropriation Risk

Giovanni Immordino and Mario Padula

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper investigates the association between discounting and risk of expropriation and provides the theoretical conditions that make a positive association consistent with rationality. Moreover, using a national representative sample and a representative sample of the 50+ in eleven European countries, we show that discounting increases with expropriation risk. The two surveys give direct measures of discount rate as well as measures derived from households consumption decisions and provide proxies for expropriation from government and expropriation from criminal offenses.

Date: 2007-05-01
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Published in Research in Economics, 2013, 67, pp. 145-156.

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