THE SOCIAL DISCOUNT RATE FOR POLAND ...

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The survey aimed at answering: 1) what social discount rate values are delivered by intertemporal choices made by polish citizens? 2) whether the value of the ...
INDIVIDUAL TIME PREFERENCES FOR INTERGENERATIONAL INVESTMENTS –THE SOCIAL DISCOUNT RATE FOR POLAND Monika Foltyn-Zarychta University of Economics in Katowice [email protected]

7th International Research Meeting in Business and Management SS Environment and Economic Growth 11-12 July 2016 Nice (France)

Agenda 1. Introduction  The contribution of the paper

2. Estimating SDR for Poland via stated preferences  Survey methodology  Descriptive statistics  Discount rates decline  Environment vs money 3. Policy implications: SDR recommendations for Poland

4. Conclusions

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1. Introduction: The contribution of the paper x 10000

Intergenerational time frame 100,0

80,0

60,0

40,0

20,0

0

30 5%

300

3%

Fig.1. Present values of 1 mln benefits at 0, 30 and 300 years

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1. Introduction: The contribution of the paper

Ramsey equation controversies

𝑠 = 𝜌 + 𝜂𝑔

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1. Introduction: The contribution of the paper Applying hypothetical market to estimate social discount rate Authors

Sample size

Direct or implicit DR

Time delays (years)

Domain of effects

Results of IDR

Luckert & Adamowicz (1993)

180 students

0-90

Forest, stock and bonds

Less than 0, 0% to over 6%

Cropper et al. (1994)

3000 (general public) 62 +54 + 80 students

Implicit: Choice questions (different time paths) Implicit: Dichotomous choice Implicit: Choice (series of choice questions)

5, 10, 25, 50, 100

Life saved, lifeyears, money

3.4% for 100 years delay to 16.8% for 5 years delay

declining

1, 2,10,30,60, 300, 900

Lives saved, health improvements and financial benefits

0% to about 40% depending on time delay

declining

Direct question to estimate the real rate of discount Implicit: Choice, matching, rating

N/A

Environmental projects (climate change) Lives saved

Mean:4%; median: 3%

N/A

Outcome domain (lives, health or financial) and beneficiary (close vs remote) did not influenced N/A

0%, 7.2% for 25 years delay, 1% or 3.8% for 100 years delay*

declining

N/A

Health, money, environment

(median) 2.7% for 5 years to 1.1% for 40 years for health

declining

Correlation between domains, age, job type

0–30, 31–75, 76–125, 126–200, 201–300, > 300

Intergenerational projects

3.47% (for time horizon 0-30) to 0.87% (for more than 300 years) mean

declining

N/A

long-term (>100 years)

General (“single number, global average and longterm”)

SDR median 2% mean 2.27%; Ramsey’s STPR: mean 3.48%, median, 3.00%

N/A

N/A 5 Experts’ characteristics: European or rest of the world, holding professor position, year of PhD

Chapman (2001)

Weitzman (2001) Frederick (2003)

Meerding et al. (2010)

Almansa & MartínezPaz (2011)

2160 economists (PhD level) 401 (voters selected for juries and undergraduat e students) 173 healthcare professionals and 34 health policymakers 98 experts

Drupp et al. 200 experts (2015) on social discounting

Implicit: Discrete choice tasks, choice experiment

Direct question to estimate the value (score or interval) of discount rate Direct question to estimate the value and components of SDR

24, 25, 100, up to 10, 10-20, 2030, Present, children and grandchildren 5, 10, and 40

Relationship between DR and time declining

Socio-economic factors influencing IDR

Choice of good, Whether is managed privately or publically, disposable income Age, race, having minor children

1. Introduction: The contribution of the paper

SDR institutional recommendations for Poland Source

SDR values

Polish Ministry of 5% Development (2015) Polish Ministry of No estimate Environment (2015)

Estimation approach

Long-term

Constant or declining

Official recommendations following EU guidelines Recommendations following EU guidelines.

Not mentioned

Constant

Domain specific or general general

Mentioned

Constant or declining

Climate change

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1. Introduction: The contribution of the paper SDR estimations for Poland Source

SDR values

Estimation approach Long-term

Evans & Sezer (2005) Florio & Sirtori (2013) Rozylow (2013)

6.1%

STPR (Ramsey)

Not mentioned Constant

Domain specific or general general

4.43%

STPR (Ramsey)

Not mentioned Constant

general

5.8% for the first 40 years and 5.3% for the rest of the period (up to 60 years) 17% for 5 years; 19% for 25 years. 9.6% for 75 years. 8.2% for 300 years

STPR (Ramsey)

Yes. 60 years

Declining

nuclear plant

Contingent valuation (close-ended questions)

Yes. 300 years

Declining

Saving lives

Foltyn-Zarychta (2014)

Constant or declining

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1. Introduction: The contribution of the paper The contribution of the paper is to fill in the gap regarding social discount rates estimates for long run public projects planning for Poland. Aim: formulating a proposal of declining discount rate schedule for Poland on the basis of individual time preferences for environmental investments elicited from contingent valuation survey.

The survey aimed at answering: 1) what social discount rate values are delivered by intertemporal choices made by polish citizens? 2) whether the value of the individual discount rate decline with time and whether this decline follows hyperbolic discounting schedule? 3) whether the value of the individual discount rate differs between private financial gains and public environmental benefits? 8

2. Estimating SDR for Poland via stated preferences Elicitation of individual discount rates from hypothetical time preferences bids Respondents ware asked to choose an environmental gain (number of visitors to national park) or a value of money (lottery gain) in the future (future effects, FE) which makes them indifferent between choosing this future gain and present effects (PE).

PE ~ FE U FE  U PE FE  1  rate PE  FE  ln  PE   IDR  n

PE – investment effects enjoyed at present FE – investment effects enjoyed in the future rate – individual rate of intertemporal exchange of present effects for future effects

IDR - individual annual discount rates for continuous compounding n - number of years of delay

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2. Estimating SDR for Poland via stated preferences Effects and delays tested

Environmental benefits – public Money benefits - private The discount rate valuation comprised of four consecutive questions for 10, 30, 90 and 150 years of delay Saving lives - Poland Saving lives - Latvia

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2. Estimating SDR for Poland via stated preferences Effects and delays tested

Environmental benefits – public Money benefits - private

The discount rate valuation comprised of four consecutive questions for 10, 30, 90 and 150 years of delay

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2. Estimating SDR for Poland via stated preferences Participants Respondents were surveyed in 2014 via Centre of Research and Knowledge Transfer at University of Economics in Katowice. The survey was designed as an internet questionnaire. Properly filled in (complete) questionnaires were returned by 502 respondents.

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2. Estimating SDR for Poland via stated preferences

Descriptive statistics for discount rate for project with environmental benefits (national parks) NP for all time lags Delay

N

NP10 NP30 NP90 NP150

470 470 469 469

Mean (%) 9.90 5.50 2.48 1.76

Median (%) 7.70 3.79 2.34 1.55

Mode (%) 0.00 0.00 0.00 0.00

NMode 150 101 91 106

Min (%) -25.58 -7.94 -2.59 -1.55

Max Q1 (%) Q3 (%) (%) 76.75 0.00 17.88 29.37 1.40 9.34 12.94 0.78 3.82 9.54 0.00 2.63

SD (%) 13.34 5.57 2.33 1.69

ANOVA Friedman, p