Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal
This paper is focused on searching for the suitable discount rate to be applied to the valuation of a project related to forests in the USA, e.g., a recreational area inside a national park. To do this, we propose a new model based on hazard rate concepts, i.e., based on the risk that waiting time i...
| Main Authors: | , , |
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| Format: | info:eu-repo/semantics/article |
| Language: | English |
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MDPI
2020
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10835/7560 |
| _version_ | 1789406668767887360 |
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| author | Muñoz Torrecillas, María José Roche, Julian Cruz Rambaud, Salvador |
| author_facet | Muñoz Torrecillas, María José Roche, Julian Cruz Rambaud, Salvador |
| author_sort | Muñoz Torrecillas, María José |
| collection | DSpace |
| description | This paper is focused on searching for the suitable discount rate to be applied to the valuation of a project related to forests in the USA, e.g., a recreational area inside a national park. To do this, we propose a new model based on hazard rate concepts, i.e., based on the risk that waiting time implies. More specifically, we derive the discount function whose instantaneous discount rate is the hazard rate of the system supporting the investment. We determine the rate of failure corresponding to different partition criteria of the whole system; in our case, we can use the information on forest fires caused in different ways, in different states or in different types of forest surfaces. After showing independence between the forest fires by states and causes, we derive a specific discount function for each cause which can be applied to every state or set of states which agree to fight against a concrete cause of forest fire. Additionally, we obtain a unique discount function by weighting the partial discount functions by type of forest surfaces. Our results are in line with the recommendations from several authors about using decreasing discount rates for projects with very long-term impacts. |
| format | info:eu-repo/semantics/article |
| id | oai:repositorio.ual.es:10835-7560 |
| institution | Universidad de Cuenca |
| language | English |
| publishDate | 2020 |
| publisher | MDPI |
| record_format | dspace |
| spelling | oai:repositorio.ual.es:10835-75602023-04-12T19:09:29Z Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal Muñoz Torrecillas, María José Roche, Julian Cruz Rambaud, Salvador social discount rate hazard rate forest fires discount function This paper is focused on searching for the suitable discount rate to be applied to the valuation of a project related to forests in the USA, e.g., a recreational area inside a national park. To do this, we propose a new model based on hazard rate concepts, i.e., based on the risk that waiting time implies. More specifically, we derive the discount function whose instantaneous discount rate is the hazard rate of the system supporting the investment. We determine the rate of failure corresponding to different partition criteria of the whole system; in our case, we can use the information on forest fires caused in different ways, in different states or in different types of forest surfaces. After showing independence between the forest fires by states and causes, we derive a specific discount function for each cause which can be applied to every state or set of states which agree to fight against a concrete cause of forest fire. Additionally, we obtain a unique discount function by weighting the partial discount functions by type of forest surfaces. Our results are in line with the recommendations from several authors about using decreasing discount rates for projects with very long-term impacts. 2020-01-17T12:51:14Z 2020-01-17T12:51:14Z 2019-05-23 info:eu-repo/semantics/article 1999-4907 http://hdl.handle.net/10835/7560 en https://www.mdpi.com/1999-4907/10/5/445 Attribution-NonCommercial-NoDerivatives 4.0 Internacional http://creativecommons.org/licenses/by-nc-nd/4.0/ info:eu-repo/semantics/openAccess MDPI |
| spellingShingle | social discount rate hazard rate forest fires discount function Muñoz Torrecillas, María José Roche, Julian Cruz Rambaud, Salvador Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title | Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title_full | Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title_fullStr | Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title_full_unstemmed | Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title_short | Building a Social Discount Rate to be Applied in US Afforestation Project Appraisal |
| title_sort | building a social discount rate to be applied in us afforestation project appraisal |
| topic | social discount rate hazard rate forest fires discount function |
| url | http://hdl.handle.net/10835/7560 |
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