A social discount rate for Italy

Marco Percoco

Applied Economics Letters, 2007, vol. 15, issue 1, 73-77

Abstract: Because of the budgetary constraints imposed by the Stability and Growth Pact, the need for cost and benefit evaluation of public investment has become increasingly relevant. In a cost-benefit analysis framework, the definition of the social discount rate is key to the selection of projects and programmes on the basis of their socio-economic return. To this extent, the Italian Ministry of the Economy has passively adopted the 5% rate proposed by the European Commission to evaluate projects financed by Structural Funds. In this article, we estimate a social discount rate for Italy, finding that a 3.7-3.8 rate would be appropriate, thus 1.2-1.3% lower than the official one.

Date: 2007
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DOI: 10.1080/13504850600706537

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