Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience

Jouini, Elyès; Napp, Clotilde; Nocetti, Diego

Jouini, Elyès; Napp, Clotilde; Nocetti, Diego (2008), Properties of the Social Discount Rate in a Benthamite Framework with Heterogeneous Degrees of Impatience, Management Science, 54, 10, p. 1822-1826. http://dx.doi.org/10.1287/mnsc.1080.0904

Type

Article accepté pour publication ou publié

External document link

http://halshs.archives-ouvertes.fr/halshs-00365980/fr/

Date

2008

Journal name

Management Science

Volume

Number

Publisher

INFORMS

Pages

1822-1826

Abstract (EN)

This 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.

Subjects / Keywords

Social Discount Rate; Hyperbolic Discounting; Cost-Benefit Analysis

JEL

D61 - Allocative Efficiency; Cost–Benefit Analysis
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
H43 - Project Evaluation; Social Discount Rate