A social discount rate for France

Abstract

Each of the member countries of the European Union should, ideally, employ the same approach to measuring a discount rate for application in the appraisal of social projects. This, however, is far from the case! The German rate is based on financial market data, the British measure reflects social time preference and the French rate is usually based on the marginal product of capital. While the German and British rates are similar in value, the French rate of 8% is over twice as high! In this paper, a discount rate based on social time preference is estimated for France and the policy implications of the result are then considered. The main finding is that the real rate of discount would fall to less than half its current level.