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The Social Discount Rate for Canada Based on Future Growth in Consumption

Author

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  • Anthony E. Boardman
  • Mark A. Moore
  • Aidan R. Vining

Abstract

Recent interim guidelines of the Treasury Board Secretariat (2007) recommend a social discount rate (SDR) of 8 percent. This paper argues that this value is based on an inappropriate methodology and is too high. Using a consumption rate of interest and drawing on a growth model, we suggest that if a project is intragenerational (less than 50 years) and there is no crowding out of private investment, then analysts should use an SDR of 3.5 percent. Impacts on investment should first be converted to consumption equivalents using a shadow price of capital of 1.26. If the project has intergenerational impacts (beyond 50 years), such as those affecting climate change, we recommend a schedule of time-declining SDRs.

Suggested Citation

  • Anthony E. Boardman & Mark A. Moore & Aidan R. Vining, 2010. "The Social Discount Rate for Canada Based on Future Growth in Consumption," Canadian Public Policy, University of Toronto Press, vol. 36(3), pages 325-343, September.
    • Handle: RePEc:cpp:issued:v:36:y:2010:i:3:p:325-343
    DOI: 10.3138/cpp.36.3.325
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    Citations

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    Cited by:

    1. Moore Mark A. & Vining Aidan R. & Boardman Anthony E., 2013. "More appropriate discounting: the rate of social time preference and the value of the social discount rate," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(1), pages 1-16, March.
    2. David F. Burgess & Richard O. Zerbe, 2013. "Appropriate discounting for benefit–cost analysis," Chapters, in: Scott O. Farrow & Richard Zerbe, Jr. (ed.), Principles and Standards for Benefit–Cost Analysis, chapter 7, pages 247-263, Edward Elgar Publishing.
    3. Moore, Mark A. & Boardman, Anthony E. & Vining, Aidan R., 2013. "The choice of the social discount rate and the opportunity cost of public funds," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 4(3), pages 401-409, December.
    4. Naseem, Anwar & Singla, Rohit, 2013. "Ex Ante Economic Impact Analysis of Novel Traits in Canola," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(2), pages 1-21, August.
    5. repec:ces:ifodic:v:12:y:2014:i:3:p:19126467 is not listed on IDEAS
    6. Aidan Vining & Anthony Boardman, 2014. "Self-interest Springs Eternal: Political Economy Reasons why Public-Private Partnerships Do Not Work as Well as Expected," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(3), pages 17-23, October.
    7. Jean-Etienne de Bettignies & Thomas W. Ross, 2010. "The Economics of Public–Private Partnerships: Some Theoretical Contributions," Chapters, in: Graeme A. Hodge & Carsten Greve & Anthony E. Boardman (ed.), International Handbook on Public–Private Partnerships, chapter 7, Edward Elgar Publishing.
    8. Adebayo, Eric & Werker, Eric, 2021. "How much are benefit-sharing agreements worth to communities affected by mining?," Resources Policy, Elsevier, vol. 71(C).
    9. Dymond, Caren Christine & Giles-Hansen, Krysta & Asante, Patrick, 2020. "The forest mitigation-adaptation nexus: Economic benefits of novel planting regimes," Forest Policy and Economics, Elsevier, vol. 113(C).
    10. Aidan Vining & Anthony Boardman, 2014. "Self-interest Springs Eternal: Political Economy Reasons why Public-Private Partnerships Do Not Work as Well as Expected," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(03), pages 17-23, October.
    11. Ran Sun & Mariella Mendoza Marmanilo & Suren Kulshreshtha, 2023. "Co-benefits of climate change mitigation from innovative agricultural water management: a case study of corn agroecosystem in eastern Canada," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 28(8), pages 1-20, December.
    12. Arian Daneshmand & Esfandiar Jahangard & Mahnoush Abdollah-Milani, 2018. "A time preference measure of the social discount rate for Iran," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-10, December.
    13. Jolanta Bijańska & Krzysztof Wodarski & Aneta Aleksander, 2022. "Analysis of the Financing Options for Pro-Ecological Projects," Energies, MDPI, vol. 15(6), pages 1-30, March.
    14. Alfred Appiah & Wiktor Adamowicz & Patrick Lloyd-Smith & Diane Dupont, 2019. "Reliability of Drinking Water: Risk Perceptions and Economic Value," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-27, April.
    15. Anthony E. Boardman & Aidan R. Vining, 2010. "Assessing the Economic Worth of Public–Private Partnerships," Chapters, in: Graeme A. Hodge & Carsten Greve & Anthony E. Boardman (ed.), International Handbook on Public–Private Partnerships, chapter 8, Edward Elgar Publishing.
    16. Boardman Anthony E & Forbes Diane, 2011. "A Benefit-Cost Analysis of Private and Semi-Private Hospital Rooms," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(1), pages 1-27, January.

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