TITLE:
Capital Gains Due to Changes in the Market Discount Rate and Workers’ Welfare
AUTHORS:
Geoffrey Woglom
KEYWORDS:
E200: Definition of Income, E210: Consumption Savings and Wealth, G120: Asset Pricing
JOURNAL NAME:
Modern Economy,
Vol.14 No.9,
September
4,
2023
ABSTRACT: The paper analyzes how capital gains due to a reduction in the market
discount rate affect life-cycle consumption choice. The analysis is done in a
simple general equilibrium model with cohorts of workers and retirees all with
constant relative risk aversion preferences. Simulation results show capital
gains due to a fall in market discount rates make workers worse off with the
exception of those with less than 7 years to retirement. The analysis has
policy implication for the taxation of capital gains.