The discount rate is a key determinant of investments in human capital and occupational choice. Individuals who are less future oriented – i.e. have a higher discount rate – are less likely to invest in human capital and hence more likely to select into careers with lower and flatter earnings profiles. Since an individual’s discount rate is unobservable, we use smoking behavior as a proxy to st...

This paper investigates the role of discount rate heterogeneity for wealth inequality. The key idea is to infer the distribution of preference parameters from the observed age pro…le of wealth inequality. The contribution of preference heterogeneity to wealth inequality can then be measured using a quantitative life-cycle model. I …nd that discount rate heterogeneity increases the Gini coe¢ cie...

In September 2011, the US Environmental Protection Agency asked 12 economists how the benefits and costs of regulations should be discounted for projects that affect future generations. This paper summarizes the views of the panel on three topics: the use of the Ramsey formula as an organizing principle for determining discount rates over long horizons, whether the discount rate should decline ...

This note discusses the asymptotic behavior of optimal trajectories in infinite horizon control problems when the objective function is a compromise between two averaged discounted sums of the same stream of rewards. We show that the turnpike associated with the lowest discount rate is the one that will prevail. We also show that, when one discount rate is equal to 0, the problem of the best co...

We analyzed the financial impacts of intensive loblolly pine (Pinus taeda) plantation establishment in the southern United States using projected growth data. Optimized management yielded positive net present values (NPVs) at all combinations of management intensity and discount rate except for the most intensive management at the highest discount rate. Cost-share payments for site preparation ...

We propose a new interest rate dynamics model where the interest rates fluctuate in a bounded region. The model is characterised by five parameters which are sufficiently flexible to reflect the prediction of the future interest rates distribution. The interest rate converges in law to a Beta distribution and has transition probabilities which are represented by a series of Jacobi polynomials. ...

We assess the impact of the Sarbanes-Oxley Act of 2002 on corporate investment in an investment Euler equation framework, where a dummy for the passage of the Act is allowed to affect the rate at which managers discount future investment payoffs. Using generalized method of moments estimators, we find that the rate U.S. firm managers apply to discount investment projects rises significantly aft...

The discount rate is a key determinant of investments in human capital and occupational choice. Individuals who are less future oriented – i.e. have a higher discount rate – are less likely to invest in human capital and hence more likely to select into careers with lower and flatter earnings profiles. Since an individual’s discount rate is unobservable, we use smoking behavior as a proxy to st...

It has been shown that long-run optimality of the limit of discounted optima when the discount rate vanishes is implied by a condition on the value function of the optimal program. We suggest a new method to verify this condition in the context of one-sector optimal growth. The idea should be more widely applicable.

HE relationship between the Federal Reserve’s discount rate and money market interest rates continues to be a topic of nuch interest and even more confusion. A significant number’ of money mar-ket analysts and some in public service believe that the discount rate is an iniportant tool through which the Federal Reserve exerts its influence overthe economy — particularly market interest rates. Th...