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Abstract
This article surveys major approaches to estimating the social discount rate (SDR)—social rate of time preference, social opportunity cost, and Ramsey formula—and applies them to Bangladesh’s macroeconomic context. It explains how growth, inequality aversion, and risk premium assumptions alter SDR choices and, in turn, ranking of long-lived projects in infrastructure, climate adaptation, and human capital.
Full Text
The paper first reviews theoretical foundations and international practice (UK Green Book, World Bank, ADB). It then calibrates Ramsey parameters (pure time preference, elasticity of marginal utility, expected growth) using Bangladesh data and contrasts results with SOC-based estimates derived from capital market proxies. Sensitivity tests illustrate impacts on NPV of flood defence, coastal embankment, and education projects. Policy recommendations include time-declining discounting for intergenerational equity, transparent parameter reporting, and consistency across ministries. The conclusion underscores that credible SDR policy improves project selection and fiscal efficiency.