Abstract
This paper explores the consequences fordiscounting of assuming limits to growth. One of the main determinants of the discount rate is the rate of economic growth. If growth rates decline in the future then the discount rate should not be constant but also decline over time. In fact, we would then need not a single discount rate but rather a variable discount schedule. This would imply higher present values for the distant future. The paper analyses how discount rates would vary with different assumptions about the patterns of growth and the pure rate of time preference.
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An earlier version of this paper was presented at the conference “ECOLOGICAL ECONOMICS”, Stockholm, August 1992. I am grateful for valuable comments from Partha Dasgupta, Gunnar Köhlin, Karl-Göran Mäler, Mike Young and two anonymous referees.
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Sterner, T. Discounting in a world of limited growth. Environ Resource Econ 4, 527–534 (1994). https://doi.org/10.1007/BF00691927
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DOI: https://doi.org/10.1007/BF00691927