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Edited by John Weiss and David Potts
Chapter 12: Cost–Benefit Analysis Traditions: The Approach of EU Regional Policy
12. Cost–benefit analysis traditions: the approach of EU regional policy* 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...
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