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A note on uncertainty and discounting in models of economic growth. (English) Zbl 1166.91321
Summary: The implications of uncertainty for appropriate discounting in models of economic growth have been studied at some length, notably by D. Levhari and T. N. Srinivasan [Optimal savings under uncertainty. Rev. Econ. Stud. 36, 153–163 (1969)] and C. Gollier [Discounting an uncertain future. J. Public Econ. 85, 149–166 (2002)]. One interesting, if perhaps minor, aspect is that under certain circumstances, there appeared to be no solution or at least no satisfactory one. More importantly, the formulas are usually given for the log normal case and are somewhat complicated and hard to interpret intuitively. I show here that assuming a general distribution for returns to capital gives simpler and more understandable results.

MSC:
91B62 Economic growth models
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