DISCOUNTING ENVIRONMENTAL-HEALTH RISKS - NEW EVIDENCE AND POLICY IMPLICATIONS

When environmental policy benefits accrue over a long time horizon, the valuation problem becomes more complex. Some analysts support the use of financial market interest rates for discounting deferred health benefits, while others argue against discounting altogether. We address the discounting issue by estimating implicit discount rates for deferred health benefits exhibited by workers in their choice of job risk. Wage responses to variation in life years at risk provide direct estimates of the discount rate that workers apply to their future utility. The estimated real discount rate equals approximately 2%, consistent with financial market rates for the period. © 1990.