The DOI matches its Crossref record; 2 of the 2 references it cites were found in a registry or an index.
Very Long-Run Discount Rates *
Abstract
We estimate how households trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the United Kingdom and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are temporary, prepaid, and tradable ownership contracts with maturities between 99 and 999 years, while freeholds are perpetual ownership contracts. The price difference between leaseholds and freeholds reflects the present value of perpetual rental income starting at leasehold expiration, and is thus informative about very long-run discount rates. We estimate the price discounts for varying leasehold maturities compared to freeholds and extremely long-run leaseholds via hedonic regressions using proprietary data sets of the universe of transactions in each country. Households discount very long-run cash flows at low rates, assigning high present value to cash flows hundreds of years in the future. For example, 100-year leaseholds are valued at more than 10% less than otherwise identical freeholds, implying discount rates below 2.6% for 100-year claims.
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Cites
By Force of Habit: A Consumption‐Based Explanation of Aggregate Stock Market Behavior
Campbell, J. Y., & Cochrane, J. H. (1999) · Journal of Political Economy · doi:10.1086/250059 · Cited by 5,210
A Review of the Stern Review on the Economics of Climate Change
Weitzman, M. L. (2007) · Journal of Economic Literature · doi:10.1257/jel.45.3.703 · Cited by 1,024
Cited by
Engle, R. F., Giglio, S., Kelly, B., Lee, H., & Stroebel, J. (2020) · The Review of Financial Studies · doi:10.1093/rfs/hhz072 · Cited by 1,489
Self-citationComprehensive evidence implies a higher social cost of CO2
Rennert, K., Errickson, F., Prest, B. C., Rennels, L., Newell, R. G., Pizer, W., Kingdon, C., Wingenroth, J., Cooke, R., Parthum, B., et al. (2022) · Nature · doi:10.1038/s41586-022-05224-9 · Cited by 1,067
Giglio, S., Kelly, B., & Stroebel, J. (2021) · Annual Review of Financial Economics · doi:10.1146/annurev-financial-102620-103311 · Cited by 908
Self-citationDisaster on the horizon: The price effect of sea level rise
Bernstein, A., Gustafson, M. T., & Lewis, R. (2019) · Journal of Financial Economics · doi:10.1016/j.jfineco.2019.03.013 · Cited by 890
Does Climate Change Affect Real Estate Prices? Only If You Believe In It
Baldauf, M., Garlappi, L., & Yannelis, C. (2020) · The Review of Financial Studies · doi:10.1093/rfs/hhz073 · Cited by 713
Metadata
- Authors
- Giglio, S., Maggiori, M., & Stroebel, J.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 2014-11-25
- Volume
- 130
- Issue
- 1
- Pages
- 1-53
- ISSN
- 0033-5533 (ISSN-L)
- 1531-4650
- OpenAlex
- W2153521119
- Cited by
- 237
- References
- 2
- FWCI
- 41.80
- Type
- journal article
- Language
- en
- Open access
- closed
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- Giglio, S., Maggiori, M., & Stroebel, J. (2015). Very Long-Run Discount Rates *. The Quarterly Journal of Economics. https://doi.org/10.1093/qje/qju036
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
