Journal Article

Intertemporal discounting and policy selection

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.

Keywords: Fiscal policy; Taxation;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 2013

Issue: Mar

Pages: 165-180