Social Rates of Discount Revisited, With Derivations For Trinidad and South Africa

Stefano Mainardi

Studies in Economics and Econometrics, 2000, vol. 24, issue 2, 67-85

Abstract: As a complementary tool to macroeconomic policies, methods of economic project appraisal have experienced a revival in recent years. The high level of theoretical abstraction of economic pricing parameters inevitably makes their selection partly determined by policy targets. However, there is scope for relying on relatively more objective criteria, and refining the functional specifications and econometric procedures, with the aim of accounting for the presence of a large subsistence economy and severe income inequality, and identifying long-run equilibrium relationships. This paper first considers controversial issues underlying the selection and derivation of social rates of discount, with particular attention to the consumption rate of interest (CRI). Applying a revised operational utility discounting method to data of a previous study, CRI estimates are obtained for Trinidad and Tobago, so as to check the sensitivity of these estimates to the derivation method. The estimation is then rerun on statistical information for South Africa, partly based on cross-section data.

Date: 2000
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DOI: 10.1080/03796205.2000.12129271

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