Discounting, Distribution and Disaggregation

Abstract

To consider the implication of disaggregated consumption and discounting, we study discounting in a world composed of the rich and the poor, a standard setting in the literature of cost-benefit analysis with distributional considerations. We derive several discount rates for different numeraires, which would enable us to discuss intergenerational and intragenerational equity in common terms. In the example of CES-CRRA utility, we also show that disaggregated discount rates may vary owing to several factors. One important parameter of such –inequality aversion– can be determined in unknown weighting of intergenerational and intragenerational concerns