FEEM working papers "Note di lavoro" series
2006 .008

Discount Rates in Risk v. Money and Money v. Money Tradeoffs


Authors: Anna Alberini, Aline Chiabai
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Value of a statistical life,Latent risk reductions,Individual discount rates,Stated preference questions
JEL n.: J17,I18,D91
JEL: Risk Analysis
Pages: Vol. 27, No. 2, pp. 483-498(16)
Date: 04/2007

Abstract

We use data from a survey of residents of five Italian cities conducted in late Spring 2004 to estimate the discount rates implicit in (a) money v. future risk reductions and (b) money v. money tradeoffs. We find that the mean personal discount rate is 2% in (a) and 8.7% in (b). The latter is lower than the discount rates estimated in comparable situations in many recent studies, greater than market interest rates in Italy at the time, and exhibits modest variation with age and gender. The discount rate implicit in money v. risk tradeoffs is in line with estimates from studies in the US and Europe, and does not depend on observable individual characteristics.

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