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Abstract

The implementation of transport infrastructure projects is a key priority of the Russian government. Large funds are allocated from the budget for road construction to ensure connectivity across the country’s regions. Evaluating their economic feasibility is a key step in managing transportation projects. A social discount rate is required to estimate the present value of net social benefits. This study aims to provide a reasonable methodology for estimating the social discount rate for long-term transport projects in Russia. To determine this rate, we use the social opportunity cost of capital approach (SOC) and the social rate of time preference approach (SRTP). For 0–30 years, we recommend SRTP = 3.2% in the general case and SOC = 7.4% to attract private funds. The confidence interval for the SRTP ranges from 1.7% to 4%. For 31–60 years, decision-makers should use 3.2%, and a zero-discount rate for the later period. The proposed solutions will be useful for other post-Soviet countries preparing large-scale infrastructure projects.

Keywords

benefit-cost analysis social discount rate public sector projects transport Russia H43 H54

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The Choice of a Social Discount Rate for Transport Projects: The Case of Russia and Post-Soviet Countries

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