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Cost-benefit analysis at government level

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Frame of Image sion against all possible alternatives (including ‘do nothing’) § Identify all the social costs and benefits § Measure them through a monetary value of the welfare change attributable to them
4
Common Set of Rules for CBA
Ø Opportunity cost of resources is the key concept for measuring social costs and benefits.
§ § “Shadow” (or accounting) prices are used to correct observed market prices. e.g. Contingent valuation, Benefit transfer, Long-run incremental costs
Ø An incremental approach is applied so that a comparison is made of the scenarios with and without the project. Ø A long-term perspective is adopted. Ø A monetary value is attributed to all the positive and negative effects of the intervention or project.
5
CBA Procedure
Break Down Cost and Benefit Items Quantify Cost and Benefit Items by Period Aggregate Cost/Benefit Items by Period Apply Social Discount Rate Calculate Present Values of Cost and Benefit Needs Criteria Compare Discounted Sums of Cost and Benefit Find the Best Alternative
6
Evaluation Criteria: NPV
Ø Net Present Value (NPV) is the present value of the benefits minus the present value of costs:
n Bt Ct NPV = å -å t t t = 0 (1 + r ) t = 0 (1 + r ) n
§ To be worthy of consideration, the cash flow stream associated with an investment must have a positive NPV.
7
Evaluation Criteria: BCR
Ø Benefit-Cost Ratio (BCR) is the ratio of benefits and costs where both are expressed as present values:
Bt BCR = å t t = 0 (1 + r )
n
Ct å t t = 0 (1 + r )
n
§ To be worth


Full Text
Title Cost-benefit analysis at government level
Similar Titles
Material Type Proceedings
Author(English)

Lee, Jongyearn

Publisher

[Sejong]:Korea Development Institute

Date 2015-02
Pages 80
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Government and Law < Public Administration
Holding KDI; KDI School