Estimation of Social Discount Rate in Iran with Using Social Time Preference Approach

Since to calculate a public fund‘s opportunity cost and also to do a feasibility study in government projects, we need social discount rate, this paper estimates the social discount rate for Iran based on the social time preference rate approach. Although, the social discount rate for urban areas has been estimated by Abdoli (2009) but since recent stagflation in Iran dramatically changed social consumption structure that can change the rate, and accuracy of approximation of this rate is very important in government resource allocation process, in this paper, we estimate this rate with using updated data. Furthermore, we use different theoretical approach rather that Abdoli (2009) to address this issue. The elements of the social discount rate are the growth rate of per-capita consumption, the elasticity of marginal utility of consumption and discount rate (based on mortality rate). We use data for the period 1361-1390 and obtain the social discount rate 5.12% with using time series technique. This estimation is reliable and can be used in the country’s cost-benefit analyses.