Some considerations on the social discount rate

Abstract In this paper, the problem of discounting in long-term project appraisal is discussed. We consider public and environmental projects that need an important investment at the starting time and yield benefits to individuals of different generations in a long period of time. For the analysis of these projects we will use the social discount. The aim of this work is to find an appropriate discount factor for the valuation of long-term public projects. The discount factor that we propose will take into account the hazard rate of the goods in which we will invest (e.g. reservoirs, forests, etc.) or the force of mortality of the population that the project is intended for, being the investment more valued when more people can “enjoy” it.

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