An Estimation of Social Discount Rate Based on Hazard Rate for Iran and Selected countries

Social discount rate is an important variable for the Cost-Benefit analysis. Commonly used discount factor in applied works is exponential discount factor. However, exponential factor has some problems: 1- Determining factors of discount rate and their impacts are varying in time. 2- Empirical and experimental evidences suggest that different individuals and groups of people discount far future with rates lower than early future. 3- If the discount rate were uncertain, it can be shown that the discount rate is decreasing in time. In this paper, we show that the problems can be mitigated by relating the discount rate with hazard rate. That relation can be established using project life probability distribution or its beneficiary’s mortality rate. In this paper, the discount factors of different statistical distribution of projects life are introduced and applied to some countries and Iran. The results show the hazard rate in Iran and India are higher and mean project life are lower than other countries in the sample.