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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
Event [Workshop] Senior Executive Program on Effective Management of Foreign Aid for Economic Development (Nepal)
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
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