Towards a better comparison of ex-post and ex-ante BCA's by decomposing potential causes of difference

Abstract

Ex-post benefit-cost analyses (BCAs) can improve the accuracy of future ex-ante BCAs and strengthen accountability for policy implementation. However, benefits and costs are usually analyzed prior to policymaking, not after. The rare ex-post BCAs available consider road and rail projects and often face methodological challenges such as difficulties describing what would have occurred in the absence of a project (the counterfactual situation). Earlier studies also mention the problem of projects being evaluated too soon after implementation. Our case study evaluates benefits and costs of a Dutch waterway project more than 10 years after its implementation, including the counterfactual situation, and compare results of the ex-post BCA with those of the ex-ante BCA. The outcome of the ex-post BCA is negative. This is in contrast with the positive outcome of the ex-ante BCA. The difference between the ex-post BCA and the ex-ante BCA is decomposed by changing assumptions step-by-step. This enables us to isolate forecasting errors of the ex-ante BCA from other potential sources of differences, such as methodological differences resulting from changes in guidelines occurring in the period between the ex-ante and ex-post BCA. As far as we know, this approach has not been attempted before in ex-ante/ex-post comparisons of BCA's for transport projects. Ex-post BCAs that explicitly define the counterfactual situation, use up-to-date insights into economic developments and check changes in the methodologies applied should accordingly be carried out more often. Ex-ante/ex-post comparisons are useful tools to improve the accuracy of BCAs, especially when they decompose of sources of difference.