“Evaluating performance of public sector projects in Russia: The choice of a social discount rate”

Abstract

Public sector project management in Russia is inefficiently carried out. One reason for this is an absence of generally accepted procedures for evaluating the performance of projects. In the framework of evaluating performance, there is the issue of evaluating the rate for discounting the anticipated benefits and costs of public projects to the present moment. This paper contains a methodology for estimating the social discount rate for cost–benefit analysis in various economic industries in Russia. We apply two approaches – social rate of time preferences and social opportunity cost of capital – and propose a methodology for projects related to any industry. We present examples of estimating the social discount rate for healthcare, education, social services, and infrastructure projects. Our results are useful when both the government and private firms are able to solve the same social problems. The findings are applicable for any country with unequal development of various economic industries.