An Empirical Comparison of the Time Preference Rate; Japan and Norway

Oliver Adam James, Ikeda Shunya

doi:10.4091/iken1991.7.1_128

The discount rate, that is the rate at which future costs and benefits should be discounted to reflect their present value, is a central feature in the economic evaluation of health care. For many years the predominant argument has been to set the discount rate for benefits equal to those for costs, which have in turn often been tied to those found in financial markets.<BR>However, over recent years many researchers have begun to elicit the time preference rate, a potential proxy for the discount rate, from experimental ch oice contexts. Attempts have been made to examine how the social or personal factors of subjects influence their time preference rate. Some effort has also been made to look at mortality versus morbidity influences and the effect of different time frames. However, until now, a direct comparison across nations has not been undertaken.<BR>This study applies a methodology developed and tested in Norway, toa Japanese sample. The results are tentative and more empirical analysis and interest in this most important area are called for. Howerver, the results derived from the Japanese sample do suggest that a methodology can be successfully applied acreoss countries, offering some hope that appropriate standardized discount rates may be obtainable. Such a development would be a major contribution to the expanding science of health economics.

An Empirical Comparison of the Time Preference Rate; Japan and Norway

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