A Social Discount Rate for the US
نویسنده
چکیده
The approach adopted in this paper in order to measure the US social discount rate is market-driven and relies on trade-offs in financial markets. The underlying assumptions are that public budgets displace the marginal private investment, and that US citizens borrow to finance home mortgages. The average debt capacity of the US citizen, or the representative investor, is 20%. It is argued that this produces an average return on net wealth while what is needed is a marginal return on net wealth. Taking a debt service ratio of 60% for the marginal investor yields a US social discount rate close to 3.7%, varying between 3.68% and 3.73%. This rate is lower than the rates available in the literature but is arguably more reasonable for very long-term public projects.
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