A social discount rate for Turkey
Social discount rate (SDR) is a very crucial policy parameter in public project appraisals due to its resource allocation impacts. If this rate is too high, future generations will face excess financial burden since distant cash flows will become negligible. If this rate is too low, ineffective projects are chosen creating an inefficient allocation of resources. This study estimates an SDR for Turkey using the social time preference rate (STPR) approach. The elasticity of the marginal utility consumption, which is the most important component of the STPR, is estimated econometrically from a demand for food approach during the period of 1980–2008. The overall result indicates that the SDR for Turkey is 5.06%. The European Union requires evaluation of the publicly supported commercial projects in terms of the SDR; hence the findings from this study can be used as a useful policy measurement for a full EU member candidate country, Turkey.
KeywordsSocial discount rate Social time preference Project appraisal ARDL Turkey
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