Current Issues in Project Analysis for Development

Current Issues in Project Analysis for Development

Elgar original reference

Edited by John Weiss and David Potts

This major work brings together authors with experience of both academic and operational project work to focus on issues such as the shadow exchange rate, the shadow wage, the discount rate and assessment of poverty impact and risk, as well as problems relating to specific sectors covering environmental projects, transport, education and health. There are also general chapters on the experience of semi-input–output-based estimation of shadow prices and the relevance of shadow pricing techniques to the context of developed economies in the EU. An overview by the editors sets out the evolution of the literature and highlights current issues. The general conclusion is that project analysis techniques remain relevant, albeit within a very different development context to that in which they were originally envisaged to be applied.

Chapter 12: Cost–Benefit Analysis Traditions: The Approach of EU Regional Policy

Massimo Florio and Silvia Vignetti

Subjects: development studies, development economics, economics and finance, development economics

Extract

* Massimo Florio and Silvia Vignetti INTRODUCTION As discussed extensively in Chapter 1, cost–benefit analysis (CBA) developed in a particular way in the context of project planning in poor countries. One of the innovative developments in the literature and practice of recent years has been the attempt to apply these CBA techniques to analysis of infrastructure projects in the European Union (EU), funded as part of EU regional policy. Since the principal aim of these funds is to help the development of the less developed regions of the EU, some of the key concerns raised in the developing country context – the use of shadow prices, the calculation of a shadow wage, the monetisation of non-market impacts, the choice of a social discount rate and the use of welfare weights – have also been addressed in work for the European Commission. In the 2007–13 programming period the EU Structural Funds and the Cohesion Fund will contribute through grants to the infrastructure plans of 27 countries, including some former transition economies. Additional funds are assisting Turkey, Croatia and other candidate and potential candidate countries. The EU seven-year budget supporting this effort will draw from a provision of around EUR 350 billion for cohesion policy (see Table 12.1). Some researchers have been critical of the effectiveness of this EU funding mechanism. In particular, the Sapir Report (Sapir et al., 2004) has proposed a wide reform to concentrate available EU resources on the new member states (the so-called re-nationalisation of EU regional policy), and...

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