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Comment on Burgess and Zerbe: On Bank Market Power and the Social Discount Rate

Published online by Cambridge University Press:  19 January 2015

Per-Olov Johansson  and
Bengt Kriström
Per-Olov Johansson
Affiliation:
Stockholm School of Economics
Bengt Kriström
Affiliation:
Center for Environmental and Resource Economics, SLU and Umeå University
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Abstract

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In this note we discuss how to estimate the social discount rate when banks have market power. Some data from Sweden are used to illustrate the approach. If other investments are crowded out, the implied social discount rate is around 7 percent, i.e. more or less equal to the one suggested by Burgess and Zerbe (2011) for the U.S. but similar to those often used in the EU (3-4 percent) if private consumption is crowded out by the considered investment.

Keywords

social discount ratemarket powersocial opportunity cost of capital
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 2 , Issue 3 , 25 August 2011 , pp. 1 - 6
Copyright
Copyright © Society for Benefit-Cost Analysis 2011

References

Burgess, D. F., 2008. Removing Some Dissonance from the Social Discount Rate Debate. Working Paper 2008-2, Department of Economics, University of Western Ontario.Google Scholar
Burgess, D. F. and Zerbe, R. O., 2011. Appropriate Discounting for Benefit-Cost Analysis. Journal of Benefit-Cost Analysis 2, Issue 2, Article 2.Google Scholar
European Commission, 2008. Guide to Cost-Benefit Analysis of Investment Projects. Technical report, DG Regional Policy. Available at http://ec.europa.eu/regional_policy/sources/docgener/guides/cost/guide02_en.pdf.Google Scholar
Sjöberg, P., 2007. Essays on performance and Growth in Swedish Banking. Doctoral Dissertation, Department of Economics, School of Business, Economics and Law, Göteborg University, No. 168. Available at http://gupea.ub.gu.se/handle/2077/7619.Google Scholar