Intertemporal Discounting and policy selection

Juan Carlos Conesa, Carlos Garriga

Research output: Contribution to journalArticleResearchpeer-review

Abstract

The choice of the intertemporal discount rate affects the measurement of the tax burden of different age cohorts. Small changes in the discount rate affect not only the magnitude of the measured changes, but also the ranking of policies using that metric. The authors illustrate this problem in the context of neutral Social Security reforms. By construction, these policies do not change allocations; hence, they also do not change welfare. However, depending on the choice of the discount rate, one could reach different (and possibly opposite) conclusions regarding the desirability of such policies. © 2013, The Federal Reserve Bank of St. Louis.
Original languageEnglish
Pages (from-to)165-179
JournalFederal Reserve Bank of St. Louis Review
Volume95
Issue number2
Publication statusPublished - 1 Mar 2013

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