scholarly journals The Dilemmas of Public Vs. Private Goods Discounting for Long-Term Investment Appraisal: The Puzzle of Citizen and Consumer Approaches to Valuation

2020 ◽  
Vol 20 (2) ◽  
pp. 114-133
Author(s):  
Monika Foltyn-Zarychta
Keyword(s):  
Discount Rate ◽  
Contingent Valuation Method ◽  
Discount Rates ◽  
Public And Private ◽  
Private Goods ◽  
Explanatory Variables ◽  
Investment Appraisal ◽  
Intertemporal Preferences ◽  
Use Values

Abstract Research background: An investment appraisal applies a single discount rate across all effects. However, this may be insufficient for heterogenous environmental impacts, mixing private and public goods as well as use and non-use values, where individuals may have multiple intertemporal preferences due to their duality to act as consumer or citizen. Purpose: The paper aims at identifying the scope of discrepancies in the level of discount rate for public and private as well as use-and non-use investment gains. Research methodology: The contingent valuation method is used to elicit stated discount rates for 2 hypothetical investments: environmental or financial gains to distinguish between public and private domain accompanied by two time-frames: short (use values) and long (non-use values). Results: The discount rate for the environment is lower than for money. It is also lower for the long-term horizon in comparison with the short-term perspective. The discrepancies are observed also for explanatory variables in respect to a socio-economic profile and attitude characteristics. Novelty: The paper adds to the discussion on valuation discrepancies between self-interested consumers and socially oriented citizens. The scarcity of previous research examining discount rates for public/private goods as well as the short/long-time horizon make the results relevant for public policy dealing with climate change and environmental protection, providing an insight into individual intertemporal preferences.

scholarly journals Future-Generation Perception: Equal or Not Equal? Long-Term Individual Discount Rates for Poland

Energies ◽  
2021 ◽  
Vol 14 (24) ◽  
pp. 8218
Author(s):  
Monika Foltyn-Zarychta
Keyword(s):  
Discount Rate ◽  
Clean Energy ◽  
Future Generation ◽  
Time Frame ◽  
Discount Rates ◽  
Energy Investment ◽  
Public And Private ◽  
Intertemporal Preferences ◽  
Time Frames

Energy-related investments gain increasing attention nowadays, particularly in Poland due to clean-energy investment needed to limit greenhouse gas emissions (GHG) and counteract climate change. However, economic appraisal is problematic: the longevity of impacts inextricably involves intergenerational ethical considerations. A crucial parameter is the choice of a discount rate. The predominant approach to estimate the discount rate in EU countries is the Ramsey rule, based on macroeconomic data, but not referring directly to society’s preferences. Those are considered by studies using surveys to elicit individual discount rates (IDR), but rarely concentrating on intergenerational time frame. The paper aims at delivering an insight into the intergenerational intertemporal preferences for Poland (households, n = 471) focusing on whether respondents are willing to declare zero discount rate intergenerationally and whether their choices differ between the short- and long-term perspectives and between human lives and money. To elicit IDR, two hypothetical investment scenarios were designed: lifesaving programs and lottery gains with delays from 10 to 150 years accompanied by attitude and socioeconomic questions. The results indicate that IDR follows hyperbolic time-decline, and a considerable share of respondents (around 20%) are willing to treat future generations as equally important in the case of human lives, while this proportion for monetary gains is two times lower. The IDR drivers differ between lives and money in respect of socioeconomic profile and attitude characteristics as well as between intragenerational and intergenerational time frames. The findings support (a) the rationale for distinct treatment of intergenerational allocations, (b) the divergence of preferences between public and private impacts, and (c) the switch from single to declining discount rate regime in Poland.

Predicting Net Discount Rates: A Comparison of Professional Forecasts, Time-series Forecasts and Traditional Methods

2010 ◽  
Vol 21 (2) ◽  
pp. 147-171 ◽  
Author(s):  
Matthew J. Cushing ◽  
David I. Rosenbaum
Keyword(s):  
Time Series ◽  
Random Walk ◽  
Interest Rate ◽  
Discount Rate ◽  
Discount Rates ◽  
Class Of Estimators ◽  
And Performance ◽  
Two Alternatives ◽  
Better Than

Abstract Previous research proposed two future net discount rate estimators that improved on naïve long-term average and random walk estimators. The proposed estimators were superior in the class of estimators that used only current and past observations on net discount rates. In this paper we consider two extensions. First we examine whether professional forecasts perform significantly better than the two alternatives. Second, we examine the properties and performance of multivariate estimators that account for the potentially differing time-series behaviors of the underlying wage growth and interest rate series.

scholarly journals The Role of Discounting in Energy Policy Investments

Energies ◽  
2021 ◽  
Vol 14 (19) ◽  
pp. 6055
Author(s):  
Gabriella Maselli ◽  
Antonio Nesticò
Keyword(s):  
Energy Policy ◽  
Discount Rate ◽  
Cash Flows ◽  
Quality Parameter ◽  
Economic Evaluations ◽  
Discount Rates ◽  
Sustainable Investment ◽  
Climate Neutrality ◽  
Over Time

For informing future energy policy decisions, it is essential to choose the correct social discount rate (SDR) for ex-ante economic evaluations. Generally, costs and benefits—both economic and environmental—are weighted through a single constant discount rate. This leads to excessive discounting of the present value of cash flows progressively more distant over time. Evaluating energy projects through constant discount rates would mean underestimating their environmental externalities. This study intends to characterize environmental–economic discounting models calibrated for energy investments, distinguishing between intra- and inter-generational projects. In both cases, the idea is to use two discounting rates: an economic rate to assess financial components and an ecological rate to weight environmental effects. For intra-generational projects, the dual discount rates are assumed to be constant over time. For inter-generational projects, the model is time-declining to give greater weight to environmental damages and benefits in the long-term. Our discounting approaches are based on Ramsey’s growth model and Gollier’s ecological discounting model; the latter is expressed as a function of an index capable of describing the performance of a country’s energy systems. With regards to the models we propose, the novelty lies in the calibration of the “environmental quality” parameter. Regarding the model for long-term projects, another innovation concerns the analysis of risk components linked to economic variables; the growth rate of consumption is modelled as a stochastic variable. The defined models were implemented to determine discount rates for both Italy and China. In both cases, the estimated discount rates are lower than those suggested by governments. This means that the use of dual discounting approaches can guide policymakers towards sustainable investment in line with UN climate neutrality objectives.

scholarly journals Multiple Discount Rates for Evaluating Public Forestry Investments

1979 ◽  
Vol 55 (1) ◽  
pp. 17-20 ◽  
Author(s):  
Bennett B. Foster
Keyword(s):  
Social Welfare ◽  
Empirical Evidence ◽  
Discount Rate ◽  
High Rate ◽  
Discount Rates ◽  
Investment Evaluation ◽  
Forestry Investments ◽  
Low Rate ◽  
Multiple Step

The critical nature of the discount rate in public forestry investment evaluation is generally recognized, as is the philosophical conflict between the need for a high rate which reflects current economic and social realities, and a low rate which assures permanence and the attainment of long-term social welfare goals. Others have suggested a dual rate approach for solving this issue. The rationale leading to their dual-rate concept can be expanded into a multiple-rate concept. In addition, empirical evidence supports a multiple rate concept: one in which rates would be influenced by the duration of investment and approximated by a formula-based continuum or a multiple-step schedule. No attempt is made to set specific rates; however, there is evidence that rates above 8% are reasonable for only a decade or two, rates above 5% reasonable for durations up to approximately 50 years, and lower rates being reasonable for longer durations.

scholarly journals Discount rate selection for long-term sequential mineral projects

2017 ◽  
Vol 33 (3) ◽  
pp. 49-70 ◽  
Author(s):  
Piotr W. Saługa
Keyword(s):  
Economic Evaluation ◽  
Cash Flow ◽  
Discount Rate ◽  
Flow Analysis ◽  
Capital Intensity ◽  
Cash Flows ◽  
Time Varying ◽  
Discount Rates ◽  
Capital Costs

AbstractMineral projects depict various specific features that differentiate them from alternative investments in other industries. Among these features, one can specify unique characteristics of mineral deposits such as scarcity, geological setting and structure, resource/reserve uncertainty and depletability. Resource uncertainty results in the sequential nature of operations (exploration, development and production stages). Other specific features of mineral projects include long investment - and production periods, high capital intensity, varying production conditions, unpredictability and high volatility of mineral prices, etc. Specific features of mineral projects are sources of exceptionally high risks. To ensure the payback of high capital costs these significant risks must be addressed in the economic evaluation of a mineral project. In the discounted cash flow analysis, DCF, which is the most commonly used in evaluations of such ventures, all project uncertainties are reflected in a level of the discount rate used for the actualization of future cash flow values. The riskier project has a higher discount rate. Apart from being extremely high risk, mineral projects are both sequential and long-term - the first feature means that the extent of a project risk decreases dramatically over time, and second - that care should be taken when evaluating these projects because cash flows arising in later years of the project lifetime have little value. The paper delivers a proposal to apply the time-varying discount rate to the economic evaluation of a mineral project. The first part introduces a commonly accepted approach to evaluating discount rates along with conceptions of adjusting them to risks of individual projects. In the following sections, the article presents the current practice in the setting of discount rates for mineral projects and then a proposed modification of this approach by introducing the time-varying discount rate. In the end, a verification of the proposed suggestion based on a copper project example has been delivered.

The Impact Of Discount Rate Choice In Estimating The Workout LGD

2011 ◽  
Vol 27 (2) ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Discount Rate ◽  
Recovery Process ◽  
Capital Requirements ◽  
Discount Rates ◽  
Loss Given Default ◽  
Explanatory Variables ◽  
Proprietary Database ◽  
Main Determinants ◽  
The Impact ◽  
Selection Of

<p>The workout approach to estimating the loss given default compares the actual value of the recovery flows with the exposure at default to measure the efficacy of the recovery process. One of the main problems related to this approach is the selection of the proper discount rate for evaluating the portfolio. In the literature, there are different solutions proposed, but there is no evidence on the impact of the choice of one of these alternatives on the LGD measurement. This paper looks at a proprietary database for the timeframe 1985-2005, evaluates the impact of the discount rate on the LGD value and studies the main determinants of LGDs computed using different approaches. Even if the explanatory variables are the same, LGDs defined using different discount rates show differences in the percentile distribution that could significantly affect the capital requirements of a financial intermediary.</p>

scholarly journals Swords and Plowshares: Property Rights, Collective Action, and Nonstate Governance in the Jewish Community of Palestine 1920–1948

2021 ◽  
pp. 1-15
Author(s):  
DAVID MUCHLINSKI
Keyword(s):  
Property Rights ◽  
Public Goods ◽  
Jewish Community ◽  
Causal Effect ◽  
Public Goods Provision ◽  
Public And Private ◽  
Private Goods ◽  
Agricultural Communities ◽  
Institutional Variation ◽  
Subnational Governance

Developing states lacking a monopoly over the use of force are commonly seen as having failed to live up to the ideal Weberian sovereign type. Yet rather than being a calling card of anarchy, the devolution of important state functions to subnational actors is a rational strategy for developing states to effectively provide important public goods. The case study of the Jewish Community of Palestine demonstrates one instance where subnational communities provided public goods. This study highlights the causal effect of property rights within institutions to drive behavior consistent with the provision of public and private goods. Analyzing temporal and institutional variation across two agricultural communities demonstrates a unique strategy of subnational governance and public goods provision in a developing state. Devolution of public goods provision to subnational actors may be an alternative strategy of governance for developing states that are not yet able to effectively provide important public goods.

أثر محددات الاستثمار في الاقتصاد العراقي للمدة (2004-2018) ، دراسة قياسية

2021 ◽  
Vol 1 (1) ◽  
Author(s):  
مهند المحمدي ◽  
محمد الحياني
Keyword(s):  
Error Correction ◽  
Statistical Significance ◽  
Economic Thought ◽  
Explanatory Variables ◽  
Equilibrium Relationship ◽  
Cointegration Tests ◽  
Short And Long Term ◽  
Standard Models ◽  
Theoretical Foundations

The research aims to measure and analyze the determinants of investment in the Iraqi economy and study the theoretical foundations of investment and analyze the viewpoint of the most important schools of economic thought regarding investment and investment determinants and their effects on economic activity , and by using possible standard models as the results of standard analysis using the joint integration tests of time series . cointegration tests, they have proven the existence of a long-term equilibrium relationship according to the methodology of the results of estimating the short and long-term parameters and the error correction parameter(ECM) , it is moving from a set of explanatory variables towards The dependent variable, while the value of the error correction vector coefficient was negative and significant , as it reached (-0.59%) , which means the fulfillment of the two basic conditions in this parameter , namely : its negative value and the statistical significance . This means that (0.59) of the short-term errors are automatically corrected during the unit of time (year) to reach the equilibrium in the long term, meaning that the investment requires about less then a year (1.6) , that is , approximately a year and 6 days to reach its equilibrium value in the long term , In other words , the previous period deviates from the long-term equilibrium and is corrected in the current by (59%) . This indicates that the adjustment in the model was relatively fast .

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