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Article: Intergenerational discounting: A case from Hong Kong

TitleIntergenerational discounting: A case from Hong Kong
Authors
KeywordsDiscount rate
Land tenure
Land value
Sustainable development
Issue Date2008
PublisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/habitatint
Citation
Habitat International, 2008, v. 32 n. 3, p. 283-292 How to Cite?
AbstractIn debating sustainable development issues such as climate changes and nuclear waste disposal, policymakers usually base their decisions on cost-and-benefit analysis (CBA), which evaluates tradeoffs between costs and benefits spanning over a century. Fundamental to this approach is the choice of an intergenerational discount rate for a society. Observable market rates, however, are mostly available up to 30 years only (e.g. US bonds), which do not necessarily reflect the long-term discount rate for a society to deal with sustainable development. A number of studies have demonstrated that a small change in the discount rate can drastically alter the CBA's outcome. This paper seeks to unveil the market's intergenerational discount rate by analyzing a very "long-lived" and inheritable asset-land property. By examining a mix of lease tenures (50, 75, 99, and 999 years) and their transactions, we found that 999-year property commands a significant premium of 5.74% over 99-year property from 1992 through 2006. The premium implies an intergenerational discount rate of 4.31% p.a. on average, which is significantly lower than the intragenerational discount rate. The discount rate so unveiled would contribute to a more informed intergenerational decision analysis, such as evaluating the cost-effectiveness of environmental legislation and assessing very long-term pollution damages in court. The result also has important implications for real estate valuation practices in China, as all land in Mainland China and Hong Kong is leasehold. © 2007 Elsevier Ltd. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/81863
ISSN
2015 Impact Factor: 2.029
2015 SCImago Journal Rankings: 1.038
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorWong, SKen_HK
dc.contributor.authorChau, KWen_HK
dc.contributor.authorYiu, CYen_HK
dc.contributor.authorYu, MKWen_HK
dc.date.accessioned2010-09-06T08:22:49Z-
dc.date.available2010-09-06T08:22:49Z-
dc.date.issued2008en_HK
dc.identifier.citationHabitat International, 2008, v. 32 n. 3, p. 283-292en_HK
dc.identifier.issn0197-3975en_HK
dc.identifier.urihttp://hdl.handle.net/10722/81863-
dc.description.abstractIn debating sustainable development issues such as climate changes and nuclear waste disposal, policymakers usually base their decisions on cost-and-benefit analysis (CBA), which evaluates tradeoffs between costs and benefits spanning over a century. Fundamental to this approach is the choice of an intergenerational discount rate for a society. Observable market rates, however, are mostly available up to 30 years only (e.g. US bonds), which do not necessarily reflect the long-term discount rate for a society to deal with sustainable development. A number of studies have demonstrated that a small change in the discount rate can drastically alter the CBA's outcome. This paper seeks to unveil the market's intergenerational discount rate by analyzing a very "long-lived" and inheritable asset-land property. By examining a mix of lease tenures (50, 75, 99, and 999 years) and their transactions, we found that 999-year property commands a significant premium of 5.74% over 99-year property from 1992 through 2006. The premium implies an intergenerational discount rate of 4.31% p.a. on average, which is significantly lower than the intragenerational discount rate. The discount rate so unveiled would contribute to a more informed intergenerational decision analysis, such as evaluating the cost-effectiveness of environmental legislation and assessing very long-term pollution damages in court. The result also has important implications for real estate valuation practices in China, as all land in Mainland China and Hong Kong is leasehold. © 2007 Elsevier Ltd. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherPergamon. The Journal's web site is located at http://www.elsevier.com/locate/habitatinten_HK
dc.relation.ispartofHabitat Internationalen_HK
dc.subjectDiscount rateen_HK
dc.subjectLand tenureen_HK
dc.subjectLand valueen_HK
dc.subjectSustainable developmenten_HK
dc.titleIntergenerational discounting: A case from Hong Kongen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0197-3975&volume=32&spage=283&epage=292&date=2007&atitle=Intergenerational+Discounting:+A+Case+from+Hong+Kongen_HK
dc.identifier.emailWong, SK: kelvin.wong@hku.hken_HK
dc.identifier.emailChau, KW: hrrbckw@hku.hken_HK
dc.identifier.emailYiu, CY: ecyyiu@hkucc.hku.hken_HK
dc.identifier.authorityWong, SK=rp01028en_HK
dc.identifier.authorityChau, KW=rp00993en_HK
dc.identifier.authorityYiu, CY=rp01035en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.habitatint.2007.08.015en_HK
dc.identifier.scopuseid_2-s2.0-43049173432en_HK
dc.identifier.hkuros139337en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-43049173432&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume32en_HK
dc.identifier.issue3en_HK
dc.identifier.spage283en_HK
dc.identifier.epage292en_HK
dc.identifier.isiWOS:000257625300001-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridWong, SK=7404591021en_HK
dc.identifier.scopusauthoridChau, KW=24830082500en_HK
dc.identifier.scopusauthoridYiu, CY=9248825800en_HK
dc.identifier.scopusauthoridYu, MKW=55475802700en_HK

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