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Discount Rates in Risk v. Money and Money v. Money Tradeoffs

Author

Listed:
  • Anna Alberini

    (University of Maryland and Fondazione Eni Enrico Mattei)

  • Aline Chiabai

    (Fondazione Eni Enrico Mattei)

Abstract

We use data from a survey of residents of five Italian cities conducted in late Spring 2004 to estimate the discount rates implicit in (a) money v. future risk reductions and (b) money v. money tradeoffs. We find that the mean personal discount rate is 2% in (a) and 8.7% in (b). The latter is lower than the discount rates estimated in comparable situations in many recent studies, greater than market interest rates in Italy at the time, and exhibits modest variation with age and gender. The discount rate implicit in money v. risk tradeoffs is in line with estimates from studies in the US and Europe, and does not depend on observable individual characteristics.

Suggested Citation

  • Anna Alberini & Aline Chiabai, 2006. "Discount Rates in Risk v. Money and Money v. Money Tradeoffs," Working Papers 2006.8, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2006.8
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    File URL: https://www.feem.it/m/publications_pages/NDL2006-008.pdf
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    Cited by:

    1. Alberini, Anna & Chiabai, Aline, 2007. "Urban environmental health and sensitive populations: How much are the Italians willing to pay to reduce their risks?," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 239-258, March.
    2. Andrew Meyer, 2013. "Estimating discount factors for public and private goods and testing competing discounting hypotheses," Journal of Risk and Uncertainty, Springer, vol. 46(2), pages 133-173, April.
    3. Therese Grijalva & Jayson Lusk & W. Shaw, 2014. "Discounting the Distant Future: An Experimental Investigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(1), pages 39-63, September.
    4. Andrew Meyer, 2013. "Intertemporal Valuation of River Restoration," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(1), pages 41-61, January.
    5. Michela Faccioli & Nicholas Hanley & Catalina M. Torres Figuerola & Antoni Riera Font, 2015. "Do we care about sustainability? An analysis of time sensitivity of social preferences under environmental time-persistent effects," DEA Working Papers 71, Universitat de les Illes Balears, Departament d'Economía Aplicada.

    More about this item

    Keywords

    Value of a statistical life; Latent risk reductions; Individual discount rates; Stated preference questions;
    All these keywords.

    JEL classification:

    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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