MUSINGS ON THE SOCIAL DISCOUNT RATE

Arnold C. Harberger () and Glenn P. Jenkins ()
Additional contact information
Arnold C. Harberger: University of California, Los Angeles, California, USA
Glenn P. Jenkins: Department of Economics, Queens University, Kingston, Ontario, Canada

No 2025-15, Development Discussion Papers from JDI Executive Programs

Abstract: This paper is mainly concerned with weighted-average measures of the social discount rate, where the components of the average are the marginal productivity of investment (measured by its gross-of-tax rate of return), and the marginal rate of time preference (measured by the net-of-tax yield of capital).We believe that these components should best be measured using data (the national accounts) that span the whole economy and reflect the product actually produced and the rewards actually perceived. We use a methodology based on just four familiar parameters to generate productivity estimates applicable to a wide range of countries. In the process, we make an adjustment for infrastructure investment, also excluding income from land, monopoly markups, supra-marginal returns due to increases in total factor productivity (TFP), and returns to capital in financial intermediation. The end products are estimates of social discount rates averaging around 8% for the advanced countries, and 10% for healthy developing countries and Asian Tigers.

Keywords: discounting; discount rate; economic cost of capital; rate of time preference; gross of tax rate of return. (search for similar items in EconPapers)
JEL-codes: H43 (search for similar items in EconPapers)
Pages: 29 Pages
Date: 2026-04-21
References: Add references at CitEc
Citations:

Downloads: (external link)
http://cri-world.com/publications/qed_dp_4641.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:dpaper:4641

Access Statistics for this paper

More papers in Development Discussion Papers from JDI Executive Programs Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().