An innovative methodology for the assessment of the social discount rate: an application to the European states for ensuring the goals of equitable growth

Abstract

PurposeThe European Commission has established the reference value of the social discount rate (SDR) to be used in the cost-benefit analysis according to the subdivision of the states relating to the beneficiaries of the Cohesion Fund. This criterion does not allow to adequately consider the economic, social and environmental conditions of each European states for ensuring an equitable and inclusive growth. The aimof the work is to provide an innovative methodology for assessing the “adjusted” SDR according to the socioeconomic and environmental conditions that differently affect the sustainable development of each European state.Design/methodology/approachThrough the implementation of a methodological approach that consists of ordered and sequential phases and the synergic adoption of the Multi-Criteria Techniques with the Data Envelopment Analysis, a corrective coefficient of the SDR established by the European Commission is determined.FindingsThe results obtained for the 27 European states highlight how the different conditions of each of them could affect the correct choice of the SDR to be used in the Cost-Benefit Analysis.Originality/valueThe proposed research represents a useful reference for identifying national reference SDR values for each European state, consistent with its specificities and with the goals of inclusive growth of the countries and of social and territorial cohesion. Furthermore, the traceability of the methodology in its phases will allow to adapt the SDR to sudden events or exogenous shocks.