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http://dx.doi.org/10.15266/KEREA.2015.24.1.085

A study on Applying Hyperbolic Social Discount Rate onto the Benefit-Cost Analysis: Focused on Appropriate Analytical Time Span  

Kim, Sang Kyum (Department of Economics, Dankook University)
Publication Information
Environmental and Resource Economics Review / v.24, no.1, 2015 , pp. 85-107 More about this Journal
Abstract
This study analyzes the effect of applying hyperbolic social discount rate onto the results of benefit-cost analysis of environmental public investment projects in Korea. In order to check the application possibility to the actual feasibility study, the discount factors generated by hyperbolic function, rather than traditional exponential one, would be applied to the benefit and cost data from the pre-feasibility studies which peformed for environmental public investment projects. The results of this study shows that using hyperbolic social discount rate is effective for enhancing test results, only under the condition of which the full expansion of the time periods of analysis is satisfied. According to the simulation results of this study, to achieve higher benefit/cost ratio by using hyperbolic social discount rate, the period should be increased up to 120 to 150 years at least.
Keywords
Social Discount Rate; Hyperbolic Discount; Benefit-Cost Analysis; Feasibility Tests;
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Times Cited By KSCI : 1  (Citation Analysis)
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