When Does Social Discounting Favor the Young? Welfare Comparisons in Heterogeneous Economies

2026/06/02 by I. Sebastian Buhai · 1 voice
Economics, Econometrics and Finance · #econ.TH

paper · pdf

arxiv published 2026/06/02 · arxiv updated 2026/07/11

Abstract

Social discounting is often interpreted as ranking young and old agents. In a heterogeneous economy, however, a social discount schedule does not determine a unique age ranking. The sign can reverse with the states being compared and may remain unidentified when common support is disconnected. I characterize when local young-old comparisons isolate age-related social priority rather than differences in private marginal values, constraints, or units. A coherent system of normalized welfare weights exists if and only if every supported path between the same states implies the same ratio. In a calibrated life-cycle economy, every retained local comparison favors the young, yet the aggregate ranking favors the old under one component normalization, favors the young on the largest shared component, and is unidentified when component scales are unrestricted.

Citations

• The Nonparametric Approach to Demand Analysis
• The Construction of Utility Functions from Expenditure Data

Discussions

• A calibrated OLG audit asks then asks which age signs survive after support, units, wedges, and anchors are made explicit, and which claims remain uncertified rather than a matter of noise alone. Prep [bsky, 3 points, 0 comments]

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