NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Qingran Li

Duke University
Durham, NC 27708
USA

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Duke University

NBER Working Papers and Publications

December 2018Discounting for Public Cost-Benefit Analysis
with William A. Pizer: w25413
Standard U.S. practice for public cost-benefit analysis is to bound the discount rate with the interest rate paid by capital investment and rate received by consumers. These bounding cases arise when future benefits accrue to consumers in either a two-period model or as a perpetuity. We generalize to consider benefits paid in any future period. We find that the appropriate discount rate converges to the consumption rate for benefits in the distant future. More generally, the range of rates depends on the temporal pattern. Applied to CO2 damages, we estimate the appropriate discount rates of between 2.6 and 3.4 percent.
 
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