Building a Bridge Across CBA Traditions: The Contribution of EU Regional Policy

Abstract

This paper presents the basic principles of the EU approach to cost-benefit analysis (CBA) of infrastructure projects, as embodied in the recently issued CBA Guide for the Structural Funds. After an introduction about the objectives and instruments of the 2007-2013 EU Cohesion Policy, the paper discusses some methodological choices which have been made by the team authoring the EC Guide. Some ‘rules of the game’ (i. e. the use of shadow prices, the calculation of a proper shadow wage, the monetisation of non-market impacts, the choice of a social discount rate and the use of welfare weights) have been proposed in the Guide, in the light of regional differences in market conditions and welfare objectives of the EU regional development policy. The analysis shows that, differently from well-known national traditions of Cba in Europe (an explicit comparison is made with the British “Green Book”) the EU perspective calls for a general CBA framework which is not so different from the project appraisal practice in less developed countries.