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

Anna Alberini and Aline Chiabai
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Aline Chiabai: Fondazione Eni Enrico Mattei

No 2006.8, Working Papers from 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.

Keywords: Value of a statistical life; Latent risk reductions; Individual discount rates; Stated preference questions (search for similar items in EconPapers)
JEL-codes: J17 I18 D91 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2006-01

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Persistent link: http://EconPapers.repec.org/RePEc:fem:femwpa:2006.8

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