Social Discount Rate model

This research systematically identifies, examines and compares two primary methodologies for the social discount rate (SDR) calculation: the social rate of time preference (SRTP) and the social opportunity cost (SOC). The SRTP, grounded in the Ramsey formula, emerges as an advantageous approach for assessing infrastructure with a long useful life. Indeed, its effective integration of economic and societal indicators contributes to more reliable long-term estimations by governmental bodies. However, challenges in SRTP implementation exist, primarily due to a lack of consensus on input values, leading to potential
inconsistencies in practical applications. In contrast, the SOC methodology faces drawbacks; it lacks a well defined estimation protocol and fails to account for consumption displacement, which hampers its recommendation within guidelines. Particular concerns about the applicability of SOC arise from the
several differences between public and private sectors, undermining its reliability.
This research enriches the understanding of the SDR, enhancing clarity about its estimations and providing valuable insights for practitioners and policymakers. By presenting the advantages and disadvantages of each method, it can facilitate the improvement of current methods or the development of new frameworks.
Ultimately, this research fosters more informed decision-making and strategic practice within the realm of SDR computation.