Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience
AbstractThis paper derives the properties of the discount rate that should be applied to a public-sector project when the affected population has heterogeneous degrees of impatience. We show that, for any distribution of discount rates, the social discount rate has the following properties: it decreases over time, it is lower than the average of the discount rates in the population, and it converges to the discount rate of the most patient individual in the economy. These properties hold for both constant and decreasing individual discount rates. Finally, we evaluate how changes in the distribution of individual discount rates affect the social discount rate.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 54 (2008)
Issue (Month): 10 (October)
social discount rate; hyperbolic discounting; cost-benefit analysis;
Other versions of this item:
- Jouini, Elyès & Napp, Clotilde & Nocetti, Diego, 2008. "Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience," Economics Papers from University Paris Dauphine 123456789/260, Paris Dauphine University.
- Diego Nocetti & Elyès Jouini & Clotilde Napp, 2008. "Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience," Post-Print halshs-00365980, HAL.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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