The Social Discount Rate : Estimates for Nine Latin American Countries

The social discount rate measures the rate at which a society would be willing to trade present for future consumption. As such it is one of the most critical inputs needed for cost-benefit analysis. This paper presents estimates of the social discount rates for nine Latin American countries. It is argued that if the recent track record in terms of growth in the region is indicative of future performance, estimates of the social discount rate would be in the 3-4 percent range. However, to the extent that the region improves on its past performance, the social discount rate to be used in the evaluation of projects would increase to the 5-7 percent range. The paper also argues that if the social planner gives a similar chance to the low and high growth scenario, the discount rate should be dependent on the horizon of the project, declining from 4.4 percent for a 25-year horizon to less than 4 percent for a 100-year horizon.

Bibliographic Details

Main Author:	Lopez, Humberto
Language:	English
Published:	World Bank, Washington, DC 2008-06
Subjects:	ALTERNATIVE USE, AVERAGE GROWTH, AVERAGE GROWTH RATE, AVERAGE TAX RATES, CALCULATION, CALCULATIONS, COMMODITY, COMMODITY PRICES, CONSUMERS, COST EFFECTIVENESS, COUNTRY LEVEL, CROSS COUNTRY, DENSITY FUNCTION, DERIVATIVES, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPMENT INDICATORS, DISCOUNT RATE, DISCOUNT RATES, ECONOMETRIC MODELS, ECONOMIC ANALYSIS, ECONOMIC GROWTH, ECONOMIC LITERATURE, ECONOMIC REVIEW, ECONOMICS, ECONOMICS LETTERS, ECONOMICS LITERATURE, ELASTICITY, EMPIRICAL ESTIMATES, EMPIRICAL LITERATURE, EMPIRICAL STUDIES, EMPIRICAL WORKS, EXPECTED VALUE, EXPENDITURE, FINANCIAL SECTORS, FORECASTS, FUTURE GROWTH, FUTURE INCOME, GDP, GOVERNMENT BONDS, GROWTH LITERATURE, GROWTH MODELS, GROWTH PROJECTIONS, GROWTH PROSPECTS, GROWTH RATE, GROWTH RATES, HIGH GROWTH, HIGH INCOME COUNTRIES, HISTORICAL GROWTH, INCOME DISTRIBUTION, INCOME LEVEL, INCOME LEVELS, INCOME TAX, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INVESTMENT PROGRAMS, LATIN AMERICAN, LIFE SPAN, LIFETIMES, LONG RUN, LOWER INTEREST RATE, LUMP SUM, MARGINAL TAX, MARGINAL TAX RATE, MARGINAL TAX RATES, MARGINAL UTILITY, MARGINAL UTILITY OF CONSUMPTION, MORTALITY RATES, OPPORTUNITY COST, PER CAPITA CONSUMPTION, PER CAPITA CONSUMPTION GROWTH, PER CAPITA GROWTH, PER CAPITA GROWTH RATE, PER CAPITA INCOME, PER CAPITA INCOME LEVEL, PER CAPITA INCOME LEVELS, PERSONAL INCOME, POINT ESTIMATES, POLICY MAKERS, POLICY MAKING, POLICY RESEARCH, POLITICAL ECONOMY, POSITIVE IMPACT, PRIVATE INVESTMENT, PRIVATE SECTOR, PROBABILITY, PRODUCTION FUNCTIONS, PUBLIC EXPENDITURE, PUBLIC FINANCE, PUBLIC GOODS, PUBLIC INVESTMENT, PUBLIC POLICIES, PUBLIC SECTOR, PUBLIC SECTOR BORROWING, PUBLIC SPENDING, RATE OF INTEREST, RATE OF RETURN, REAL RATE, RISK AVERSION, SAVINGS, SAVINGS BEHAVIOR, SAVINGS PROGRAM, SIGNIFICANT DIFFERENCES, TAX, TAX RATE, TAX RATES, TAX REGIME, TREASURY, UTILITY FUNCTION, WORTH, Social discount rate, cost-benefit analysis,
Online Access:	http://documents.worldbank.org/curated/en/2008/06/9493488/social-discount-rate-estimates-nine-latin-american-countries https://hdl.handle.net/10986/6659
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