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The derivation of discount rates with an augmented measure of income

Nicholas Muller

Journal of Environmental Economics and Management, 2019, vol. 95, issue C, 87-101

Abstract: Most developed economies invest in public goods such as national defense, education, infrastructure, and the environment. Discount rates used to evaluate such projects should reflect the rate of return on the current mix of investment opportunities. Rates derived from the productivity of private capital neglect returns beyond the market boundary. The present paper derives discount rates using an augmented measure of national income inclusive of non-market goods. In an empirical application focusing on air pollution and climate damages in the United States economy, the paper reports that the difference between augmented and market discount rates averages 0.3 percentage points from 1999 to 2014.

Keywords: Social discount rate; National income and product accounts; Integrated assessment model; Air pollution (search for similar items in EconPapers)
Date: 2019
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Working Paper: The Derivation of Discount Rates with an Augmented Measure of Income (2016) Downloads
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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