The Economic Opportunity Cost of Capital for Canada - An Empirical Update
The social or economic discount rate is the threshold rate used to calculate the net present value of an investment project, a program, or a regulatory intervention to see whether the proposed expenditures are economically worthwhile to undertake. The size of the economic rate of discount has been a policy issue in Canada for many years. The debate has been primarily concerned with the empirical measurement of the economic opportunity cost of funds. The purpose of this paper is to reexamine and update the empirical estimation of what is the appropriate economic discount rate for Canada. The results suggest that estimates of the economic discount rate can range from 7.78 percent to 8.39 percent real. As a consequence, we conclude that for Canada an 8 percent real rate is an appropriate discount rate to use when calculating the economic net present value of the flows of economic benefits and costs over time.
|Date of creation:||Jul 2007|
|Contact details of provider:|| Postal: Kingston, Ontario, K7L 3N6|
Phone: (613) 533-2250
Fax: (613) 533-6668
Web page: http://qed.econ.queensu.ca/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sandmo, Agnar & Dreze, Jacques H, 1971.
"Discount Rates for Public Investment in Closed and Open Economies,"
London School of Economics and Political Science, vol. 38(152), pages 395-412, November.
- SANDMO, Agnar & DREZE, Jacques H., "undated". "Discount rates for public investment in closed and open economies," CORE Discussion Papers RP 98, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Glenn Jenkins & JOHN EVANS, 1980. "The Cost Of U.S. Direct Foreign Investment," Development Discussion Papers 1980-01, JDI Executive Programs.
- Harberger, Arnold C & Wisecarver, Daniel L, 1977. " Private and Social Rates of Return to Capital in Uruguay," Economic Development and Cultural Change, University of Chicago Press, vol. 25(3), pages 411-445, April.
- Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 3-27, April.
- Sjaastad, Larry A & Wisecarver, Daniel L, 1977. "The Social Cost of Public Finance," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 513-547, June.
- Danny M. Leipziger, 1974. "Capital Movements and Economic Policy: Canada Under a Flexible Rate," Canadian Journal of Economics, Canadian Economics Association, vol. 7(1), pages 59-74, February.
- Glenn P. Jenkins, 1981. "The Public-Sector Discount Rate for Canada: Some Further Observations," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 399-407, Summer.
- David Burgess, 2008. "Removing Some Dissonance From the Social Discount Rate Debate," University of Western Ontario, Economic Policy Research Institute Working Papers 20082, University of Western Ontario, Economic Policy Research Institute.
- David F. Burgess, 1981. "The Social Discount Rate for Canada: Theory and Evidence," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 383-394, Summer.
- Glenn Jenkins, 1973. "The Measurement Of Rates Of Return And Taxation From Private Capital In Canada," Development Discussion Papers 1973-02, JDI Executive Programs.
- Chun-Yan Kuo & Glenn P. Jenkins & M. Benjamin Mphahlele, 2003. "The Economic Opportunity Cost Of Capital In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(3), pages 523-543, September. Full references (including those not matched with items on IDEAS)