The Farmers Home Administration's Social Discount Rate
Posted: 29 Oct 2018
Date Written: 1989
The aim was to estimate the SDR revealed by past decisions by the Farmers Home Administration (FmHA) concerning their farm-ownership programme in New York State. These decisions involved trading off a current loan against a long stream of future farm profits. The ratio of the coefficients to these two variables in a logit equation produced the estimate of the SDR. The main finding was that a very high rate of discount was uncovered, in the range 70–73%. These high rates may be explained by ‘individual risk’ and the life-cycle context in which the estimates were made.
Suggested Citation: Suggested Citation