October 12 2017

"Discounting and the Representative Median Agent", a Paper Co-authored by FEEM

Johannes Emmerling, FEEM researcher, has recentely co-authored the paper "Discounting and the representative median agent" published in the journal Economics Letters.

In this research, Emmerling et al. show that by using the growth of the mean income in the Social Discount Rates (SDR), changing income inequalities are ignored – an important omission for public policy analysis. The study proposes an ‘inequality-adjusted’ SDR based on the representative median agent that takes changing inequalities into account. It uses the difference between growth of the mean and median incomes to better represent the economic growth experienced by the majority of society.
This measure could augment guidelines on public investment, since median income growth is routinely collected by national statistical organizations. The findings could also augment international guidelines on the estimation of the social cost of carbon.


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