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A protocol for the estimate of the social rate of time preference: the case studies of Italy and the USA

Antonio Nesticò and Gabriella Maselli

Journal of Economic Studies, 2020, vol. 47, issue 3, 527-545

Abstract: Purpose - The purpose of the paper is to characterize an evaluation protocol of the social discount rate (SDR). This is based on the social rate of time preference (SRTP) principles, according to which the investment selection process must tend to maximize the utility of the community. Design/methodology/approach - The theoretical reference of the evaluation protocol is represented by the Ramsey formula. It is widely used in many countries with advanced economics for the SRTP estimation, through the maximization of the Social Welfare Function (SWF). Findings - The protocol structure and the protocol applications to the Italian and US economies explain how the SDR value is influenced by the socio-economic structure of the single nation. Research limitations/implications - The strong variability of the results of the SDR according to the theoretical approach of reference and the operating path that follows can lead to judgments decidedly divergent on the acceptability of the public project, hence, the important policy implications for the entire allocation process of public resources. Practical implications - The applications allow to highlight the important operational problems that must be resolved with regard to the choice of the time intervals of the evaluations, as well as logical-operational tools to be used to express estimates of parameters. Social implications - They are relevant in relation to the effects of a more equitable allocation of the resources. Originality/value - The protocol for the SDR estimation is based both on solid disciplinary principles and on objective data of non-complex availability and representative of the economic and socio-demographic context of the country in which the decision-making process is implemented.

Keywords: Economic Policy; Economic Evaluation of Projects; Social Discounting (search for similar items in EconPapers)
Date: 2020
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