Cost benefit analysis
Cost-Benefit Analysis is used to assess whether a public policy or a public project is globally beneficial or detrimental to society. The approach is typically implemented to public decisions in the fields of transportation infrastructures, environment and natural resources, health and education. It estimates and totals up the equivalent money value of the benefits and costs to the community of projects to establish whether they are worthwhile. The method not only compare the financial flows (investments and operating costs) but also the economic effects (variation in consumption of public services, change in the satisfaction derived from them).
Content
Part 1 : Microeconomic foundations of CBA
Rationale for cost benefit analysis
Citizen preferences and public goods
Consumer surplus and willingness to pay
Optimal provision of public goods
Part 2 : Financial appraisal
Methodology of financial appraisal
Sustainability analysis
Profitability analysis
Sensitivity analysis
Part 3 : Economic appraisal
Discount of benefits and costs
Accounting for market distortions
Sensitivity analysis
Part 4 : Estimation of welfare changes
Methods at a glance
Contingent valuation
Discrete choice experiment
Hedonic pricing
Travel cost method
Bibliography
Chapitre 6, 7 & 9, ‘STATISTICAL TOOLS FOR PROGRAM EVALUATION: Methods and Applications to Economic Policy, Public Health, and Education’ by Josselin and Le Maux, Springer.
European Commission (2014). Guide to cost-benefit analysis of investment projects. Economic appraisal tool for cohesion policy 2014-2020.
Examination
A 10 min presentation (5-10 slides, group of 2-3 students) of a CBA study.
Context: What is the project, the topic, the current state of knowledge on the subject?
Data: what are the costs and benefits? Discount rate?
Methods: How are the costs and benefits computed?
Results: What is the conclusion? Sensitivity analysis?
Your comments: What are the authors missing?