Declining Discount Rates Maureen

In this paper we ask whether the US government should replace its current discounting practices with a declining discount rate schedule, as the UK and France have done, or should continue to discount the future at a constant exponential rate. To address the question, we briefly present the theoretical basis for a declining discount rate (DDR) schedule, but focus on how, in practice, a DDR could be estimated for use by policy analysts. We discuss the empirical approaches in the literature and review how the UK and France estimated their DDR schedules. We conclude with advice on how the US might proceed to consider modifying its current discounting practices.