An introduction to spatial discounting

Research on the valuation of environmental externalities shows that decisio n makers tend to discount not only over time but across space. Just as time discounting has implications for intergenerational equity, geographical or spatial discounting has implications for intragenerational equity. Similar ly, just as positive time discount rates are warranted by positive net rate s of growth of the capital stock, positive spatial discount rates may be wa rranted by the fact that environmental (or other external) effects of econo mic activity are diffused at positive rates. This paper introduces the noti on of spatial discounting and explores its welfare implications through a s imple diffusion model.