Cost–benefit Analysis, Planning and Innovation
- Transport Economics, Management and Policy series
Edited by Hugo Priemus, Bent Flyvbjerg and Bert van Wee
Chapter 4: Cost–Benefit Analysis and the Wider Economic Benefits from Mega- Projects
4. Cost–beneﬁt analysis and the wider economic beneﬁts from mega-projects Roger W. Vickerman 4.1 INTRODUCTION The potential for mega-projects to generate a social surplus, beneﬁts above and beyond those accruing to users, has been recognised for a long time. The standard cost–beneﬁt approach to the appraisal of transport infrastructure has tended to ignore such wider beneﬁts, arguing that a welldeﬁned cost–beneﬁt analysis will ensure that the beneﬁts to users will adequately capture all economic beneﬁts. This has led to the situation where project promoters will attempt to reinforce the justiﬁcation for projects by adding a mark-up to the user beneﬁts to reﬂect these supposed wider beneﬁts to the economy. This practice has then been extended to using such wider beneﬁts as a means of justifying projects that would not be acceptable on the basis of the user beneﬁts alone. Over the last 15 years considerable eﬀort has been expended on providing a more rigorous theoretical basis for including such wider eﬀects and on gathering empirical evidence to assess whether the magnitude of any errors from ignoring them is suﬃcient to justify the added complexity of widening the appraisal framework. In Section 4.2 we examine the theoretical justiﬁcation for including any wider economic impacts; in Section 4.3 we assess empirical evidence on the extent of such impacts; and in Section 4.4 we consider the implications for the appraisal process,...
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