The Social Discount Rate for Land‐use Projects in India

Abstract

The social discount rate is derived from an inter-temporal social utility model or land-use projects in India. The social discount rate is a function o f two parameters: the elasticity of social marginal utility of consumption and the growth rate of per capita real consum tion. The final results for the social discount rate and the elasticity o{ocial marginal utility of consum tion are 2 per cent and -1.4 respectively. found in the literature. These values are plausib f e and comparable with other estimatesSocial forestry programmes, which include forestry and a roforestry as Rural Development and orest Department. At least 25 er cent of the total outlay for rural development schemes in India is presently eing earmarked for social forestry. The prime aim of these programmes is to rovide the basic providing employment for the poor and thereby generating some income with which to raise their living standards. Social forestry programmes, which are subsistence-oriented and labour-intensive, have existed in India for a long time, and similar programmes are currently being implemented in more than 50 developing countnes (Foley and Barnard, 1984). as a consequence of the failure of the trickle-down strategy resulting in the need to develo measures for attacking the chronic poverty directly. This strong shift in avour of a redistribution-with-growth strategy is reflected in Indian planning mainly from the mid-l970s, when many anti-poverty and rural development programmes were initiated. This pa er describes the estimation of the social discount rate, based on the trade-off g etween present and future consumption, for India.Social forestry systems are inherently long-term in nature. This means that discounting remotely accrued benefits at a high discount rate critically influences decisions regarding social forestry development (compared with other, short-term uroiects). At high discount rates. not only do social forestry components, are being im lemented in India using investment B unds from the consumption needs, 1.e. sta le food, fuelwood, fodder, an B small timber for construction and agricultura P implements. Equally important is the objective of

A time preference measure of the social discount rate for the UK

“…From the plausible and statistically valid income and compensated price elasticity estimates of the demand for food, an estimated e value of ¡ 1:60 was derived (see previous section for full details on this). In fact, further estimation of this same demand for food model covering the data period 1963±1993 revealed that the estimated income and price elasticities remained very similar in value, thus yielding much the same estimate of e. 6 By way of comparison the studies of Kula (1984) for the United States and Sharma et al (1991) for India yielded the following absolute values of e: 1.89 and 1.40 respectively. In both cases TSM demand for food models were employed to obtain estimates of e, although as Jones (1993) points out the Sharma study has a number of shortcomings; for example, the confusion of compensated and uncompensated price elasticities means that the derived e value for India must be incorrect.…”

“…Longterm social projects are the primary concern in this paper and the Social Time Preference Rate (STPR) is the discount rate measure to be calculated for the UK. 1 There have been several studies, based on the STPR approach, aiming to derive di erent countries' social discount rates: see, for example, Kula (1984Kula ( , 1985 and Sharma et al (1991). Essentially, these studies employ the same approach, an approach taken here but with some empirical re®nement involving the use of cointegration applied to upto-date data.…”

“…Here the preference is to employ a pragmatic log-linear model that dates back to the work of Tobin (1950) and Stone (1954). This Tobin±Stone model (TSM) has been used in relevant empirical work: see, for example, Kula (1984) and Sharma et al (1991). Although the model is not derived from any underlying consumer preference theory this need not be viewed as a weakness.…”

Spatial Variability and Disincentives to Harvest: Deforestation and Fuelwood Collection in South Asia

“…For an empirical estimation of the marginal utility of money for different income groups in India see e.g.,Sharma, McGregor, and Blyth (1991). It gives intuitive interpretations easily tested in empirical analysis, but is definitely a simplification.…”

Economic discount and wage rates for social forestry projects in India: estimates and problems

“…These subsistenceoriented and labour-intensive land-use projects aim to provide basic consumption needs (such as staple foods, fuelwood, fodder, small timber for construction and agricultural implements) and employment, the latter to generate some income with which to raise the living standards of the poor (Sharma et al, 1991).…”