Thanks for making everything explicit. I see that the original paper uses 1% and 2% pure time preference, which means that roughly it has a time horizon of 100 and 50 years, respectively. If India continues to grow at the roughly 1.8%/āyr GDP per capita real of the last decade, it will become as rich per capita as the US is now in about 130 years. Are you adjusting for this with your income adjustment?
I believe that this is an income adjustment the paper does already perform (āWe thus used growth-adjusted discounting determined by the Ramsey endogenous rule, with a range of values for the elasticity of marginal utility (Ī¼) and the pure rate of time preference (Ļ)ā). So I did not do any further adjustment along these linesāonly an adjustment accounting for differing present-day incomes.
I guess Iām concerned that if the scenario continues of less-developed countries catching up with developed countries that an adjustment based on differing present day incomes would be too strong. Have you tried contacting the authors to find out what they actually did?
Thanks for making everything explicit. I see that the original paper uses 1% and 2% pure time preference, which means that roughly it has a time horizon of 100 and 50 years, respectively. If India continues to grow at the roughly 1.8%/āyr GDP per capita real of the last decade, it will become as rich per capita as the US is now in about 130 years. Are you adjusting for this with your income adjustment?
I believe that this is an income adjustment the paper does already perform (āWe thus used growth-adjusted discounting determined by the Ramsey endogenous rule, with a range of values for the elasticity of marginal utility (Ī¼) and the pure rate of time preference (Ļ)ā). So I did not do any further adjustment along these linesāonly an adjustment accounting for differing present-day incomes.
I guess Iām concerned that if the scenario continues of less-developed countries catching up with developed countries that an adjustment based on differing present day incomes would be too strong. Have you tried contacting the authors to find out what they actually did?