Economic Rate Of Return Research Articles

The ambiguous nature of forecasts in project evaluation: Diagnosing the over-optimism of rate-of-return analysis

Development projects often have low economic rates of return, despite high ex ante forecasts. By reviewing several sets of project appraisals undertaken by the World Bank, this paper isolates the technical/methodological sources of this bias. There are several types of failures to account for the fact that unforeseen conditions are more likely to reduce rather than enhance the true rate of return, but the ambiguity in the status of ‘predictions’ in project evaluation allows unreasonably conditional, optimistic forecasts to be used where usually more pessimistic absolute forecasts would be appropriate.

Economics of Insecticide Resistance Management in Heliothis armigera (Lepidoptera: Noctuidae) in Australia

An insecticide resistance management (IRM) strategy for Heliothis armigera (Hubner) has been used in Australia since 1983. An ex post evaluation is difficult because we are unsure what the outcome would have been had the IRM not been introduced. We compared the actual outcome with the projected outcome of various scenarios that captured the best available estimates concerning what would have happened without IRM or with alternative IRM strategies. We also compared two variants of the economic surplus method for evaluating the inveshnent in IRM. Our analysis suggests that the economic benefits of the introduction of IRM have been substantial and that an IRM strategy should be designed to exploit insecticide susceptibility at an optimal rate. In Australia, the highest economic return was realized by the permitted use of three pyrethroid sprays per season. The low cost of implementing and maintaining the IRM in relation to its high rate of economic return indicated an excellent opportunity for increased inveshnent in research into alternative IRM approaches. IRM is a social technology. The IRM in Australia is unusual because so many factors worked in its favor. The transfer of IRM technology to different socioeconomic situations might be more difficult.

Functional Literacy, Health, and Quality of Life

Many policymakers and development planners now realize that people are fundamental to all development processes and that investment in human development provides the highest rate of economic return. This return is enormously increased when one is dealing with an educated population. The human development approach brings together the production and distribution of material resources as well as the expansion and use of human resources through focusing on increasing people's self-reliance and choice. In this approach, functional literacy has a major role to play. This article addresses two aspects of functional literacy: first, the role of education as an essential factor in preparing people to lead healthy, socially rewarding, and economically productive lives; and, second, the relevance of functional literacy to the improvement of health status, especially that of women. An interlinking approach to improving health status and quality of life through interventions that combine functional literacy, local health services, and viable economic activities is presented. This approach can be incorporated into development planning and processes so that improvement in health status and quality of life is attained along with economic objectives.

AN ECONOMIC ANALYSIS OF THE MAISSADE, HAITI, INTEGRATED WATERSHED MANAGEMENT PROJECT

An economic analysis was conducted of the Maissade Integrated Watershed Management Project in Haiti. This project, implemented by the Save the Children Federation, differs from conventional watershed management projects by investing heavily in the development of peasant organizations in order to gain voluntary and sustained adoption of soil conservation, forestry and community development innovations. Conventional projects have relied on monetary and commodity incentives in order to encourage technique adoption, and are widely viewed to have failed to achieve sustained watershed management. The goal of the economic analysis was to determine if a project representative of the new, participatory approach was economically efficient from donor and peasant perspectives. The aggregate project has a NPV of $336,600 at a 12% discount rate, a benefit-cost ratio of 1.5 and an economic rate of return of 19%. Analyzed separately, the hillside soil conservation component is economically efficient at the project level while the other components (forestry, ravine treatment and group investment) are not. Project value is most sensitive to changes in project outlay inputs and hillside treatment benefits. Both the aggregate project and all separate project components are economically efficient from the perspective of project participants, and all but the group investment component have internal rates of return exceeding 200%. Benefit-cost ratios vary from 2.5 to 30 for participation in the different project components. Investment in hillside soil conservation treatment yielded what was by far the greatest return. This analysis demonstrates that watershed management projects in Haiti which utilize peasant organization approaches can be economically efficient.

Review of irrigation system performance with respect to initial objectives

This paper presents the results of assessment studies of the performance of gravity irrigation projects, in six countries in different climate and social environments, with respect to their original objectives in terms of water availability, water use efficiencies, equity of water distribution, cropping intensity and crop yields, and project economic rates of return.

Post Depression Trends in the Economic Rate of Return for U.S. Manufacturing

Post Depression Trends in the Economic Rate of Return for U.S. Manufacturing

The profitability of smallholder rattan cultivation in Southern Borneo, Indonesia

Fieldwork in the village of Dadahup along the Lower Barito basin in Central Kalimantan (Southern Borneo, Indonesia) shows that smallholder rattan cultivation is financially profitable to smallholders and economically profitable to the nation. The financial net present value (NPV) for green and processed canes is Rp 828,000 and Rp 946,000;the economic rate of return is about 22% for both green and processed canes. The article contains a discussion of the methodology for evaluating the shadow price of a nontimber forest good.

Alternative measures of rates of return: Some empirical evidence

AbstractFirm profitability is measured in most cases by an accounting rather than by the theoretically superior economic (or internal) rate of return. This paper explores the relationship between accounting and internal rates of return using COMPUSTAT data for 1013 large industrial firms over a 20‐year period. The research was motivated by the controversy ongoing between scholars concerning the validity of the accounting rate of return as a proxy for economic profit. The method used in this paper is different from previous research in that cash flow profiles are estimated instead of being assumed. The results, while generally supporting the contention that accounting rates of return are poor proxies for underlying economic rates of return, also provide evidence that the distortions are not so great as to render them useless for performance measurement and managerial decision‐making purposes.

Accounting and Economic Rates of Return: A Note On Depreciation and Other Accruals

Journal of Business Finance & AccountingVolume 16, Issue 3 p. 425-432 Accounting and Economic Rates of Return: A Note On Depreciation and Other Accruals L.A. Gordon, The authors are respectively from the University of Maryland at College Park; and the University of Ulster at Jordanstown, County Antrim. They gratefully appreciate comments on an earlier draft of this paper from G. Benston, R. Brief, F. Fisher, G. Harcourt, G. Lawson, M. Loeb, S. Martin, G. Pinches and G. Salamon. Any remaining errors are the responsibility of the authors. They would also like to acknowledge the computational assistance of J. Tsay.Search for more papers by this authorA.W. Stark, The authors are respectively from the University of Maryland at College Park; and the University of Ulster at Jordanstown, County Antrim. They gratefully appreciate comments on an earlier draft of this paper from G. Benston, R. Brief, F. Fisher, G. Harcourt, G. Lawson, M. Loeb, S. Martin, G. Pinches and G. Salamon. Any remaining errors are the responsibility of the authors. They would also like to acknowledge the computational assistance of J. Tsay.Search for more papers by this author L.A. Gordon, The authors are respectively from the University of Maryland at College Park; and the University of Ulster at Jordanstown, County Antrim. They gratefully appreciate comments on an earlier draft of this paper from G. Benston, R. Brief, F. Fisher, G. Harcourt, G. Lawson, M. Loeb, S. Martin, G. Pinches and G. Salamon. Any remaining errors are the responsibility of the authors. They would also like to acknowledge the computational assistance of J. Tsay.Search for more papers by this authorA.W. Stark, The authors are respectively from the University of Maryland at College Park; and the University of Ulster at Jordanstown, County Antrim. They gratefully appreciate comments on an earlier draft of this paper from G. Benston, R. Brief, F. Fisher, G. Harcourt, G. Lawson, M. Loeb, S. Martin, G. Pinches and G. Salamon. Any remaining errors are the responsibility of the authors. They would also like to acknowledge the computational assistance of J. Tsay.Search for more papers by this author First published: June 1989 https://doi.org/10.1111/j.1468-5957.1989.tb00027.xCitations: 16AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinked InRedditWechat Citing Literature Volume16, Issue3June 1989Pages 425-432 RelatedInformation

Prospects and problems of irrigation development in Sahelian and sub-Saharan Africa

Although many different definitions of irrigation are being used, the need for this way of agricultural intensification is rapidly increasing as the population dependent on agriculture has in many countries largely surpassed the carrying capacity of rainfed systems. However, unfortunately many donor-sponsored irrigation projects in Africa disappoint because they are generally conceived with a too short time perspective and they suffer from a series of negative characteristics. Generally there is insufficient farmer involvement in all phases of the projects, which are formulated in isolation from existing farming systems, are capital-intensive and require high-input levels (from elsewhere), focus on the hardware, neglect agricultural production and institutional weaknesses, and cannot put up the money needed to be run. Therefore, sustainability should be the main point of orientation. Important steps towards it consist in choosing activities and forms of irrigation that fit well in the farming systems, are attractive to farmers, and can be run to a very large extent by themselves without external assistance. Marketing and production support services should be included in analysis and programmes of assistance, together with institutional strengthening and adequate land tenure arrangements. Governments' involvement in operation and management can often be reduced, and the same goes for the role of the irrigation organisations. Donor involvement should be more flexible, have a longer time-perspective, be less guided by expected economic rates of return and concentrate more on how to ensure increased sustainability of irrigation projects for both the country and the farmers.

Estimation of the Economic Rate of Return for Industrial Companies

The estimated rate of return in any investment is the discount rate that equates the present value of its expected net revenue stream to its initial outlay. Despite its importance, there are no agreed-on methods of estimating its past average values for a given company, nor are there any extensive data for different industries. This article presents a method for estimating the real economic rate of return of large industrial companies and shows that it is possible to get robust bounds on it. The economic rate of return can strongly differ from the accounting rate of return. For most companies, the economic rate of return on an inflation-adjusted basis has been declining during the last twenty years. Coauthors are Ofer Dressler, C. A. Feng, and Alan I. Avidan. Copyright 1989 by the University of Chicago.

The Economic Rate of Return in Small and Household Manufacturing Industries

Small-scale and Household Manufacturing Industry can contribute to economic development by providing employment; creating jobs with low capital costs: building up a reservoir of skilled and semi-skilled labour; reducing income disparities as small-scale manufacturing is widespread and not concentrated in any specific area or region; developing indigenous technology and raising saving and investment within the country rather than being dependent on external sources. Small-scale manufacturing is also a potential breeding ground for the development of entrepreneurial talent which is of great importance in accelerating the developmental process. In Pakistan, the importance of the small-scale manufacturing industry has not been given its due recognition. The various five-year plans mention small-scale industry but focus their main attention in other areas. For example, to quote from the First Five-Year Plan (1955 - 60):

Excess Capacity as a Commitment to Promote Entry

THIS PAPER studies dominant firms' incentives for holding capacities in excess of their production requirements. The explanation most frequently put forward is to view behaviour of this kind as an attempt to set up barriers to entry. As emphasized by Spence [1977], holding excess capacity is a relatively effective form of entry deterrence. It has the great advantage of constituting a credible threat to potential entrants because a large fraction of capacity costs are usually irreversible. The view that holding excess capacities constitutes a form of anticompetitive behaviour has to be qualified, however. Part of the motivation for holding them may well be of a more benign nature: many large firms maintain economic relations with other smaller upstream (or downstream) companies. Quite often they make up a considerable part of these companies' total activities. The companies usually have to invest certain specific sunk costs into their relationship with the dominant firm. Before deciding on these sunk investments they will often like to have some assurance that the dominant firm will not behave opportunistically once these sunk costs have been incurred. By opportunistic behaviour we mean a strategy whereby the dominant firm reduces the quantity it demands (or supplies) at any given price to such an extent that the companies can no longer obtain an economic rate of return on their sunk investments. In the absence of long run contracts, a dominant firm's decision to invest into excess capacities may well be an effective means to give the upstream (or downstream) firms the assurance they require. The essential message is thus as follows. Rather than (or in addition to) being a threat to potential entrants, excess capacity held by a dominant firm may also constitute a promise to upstream suppliers (or downstream retailers). They constitute an effective promise to buy (or supply) a sufficiently large quantity at any given price to ensure that the upstream (or downstream) firm

Natural resource management and anti-desertification policy in the Sahel-Sudan zone: A case study of gum arabic

The philosophy of sustainable development argues that environmental conservation and economic development are complementary objectives in national economic planning. This contrasts with the more traditional view that development leads to inevitable sacrifies in envitronmental quality. This case study investigates a clear example of complementary in the Sahel-Sudan zone through an analysis of the economics of planting Acacia senegal to produce gum hashab (“gum arabic”). A. senegal has many environmentally benign functions besides producing gum as a cash crop. It is leguminous, stabilises soils, provides fodder and firewood and effevtively provides a ‘buffer’ against desertification. Nonetheless, the gum arabic belt is suffering increased degradation due to drought, population movement and, in the past, wrong economic incentives to farmers. Economic incentives have recently improved and the paper offers a partial cost-benefit analysis of A. senegal production to show that planting can achieve high economic rates of return.

Regional development and the value of migratory labor-some perverse economic/technological interactions

It has long been agreed, that the economic value of unemployed labor is less than its wage rate. Shadow-pricing of such labor is common practice in economic analysis. The usual outcome of such shadow-pricing is that the economic rate of return of a project is enhanced. But this is not always the case. Using the data from a soil productivity enhancement project in Mexico, it is shown that the use of essential, labor-saving technology in a project designed to increase output and Income may reduce, rather than increase economic benefits, if the displaced labor has no alternative employment opportunities, while the opposite is the case if such alternatives exist.

Evaluation of irrigation projects under uncertainty: a symmetric quadratic programming approach

Experience with irrigation projects in developing countries has shown that a substantial number of projects have not been able to achieve the planned change in the cropping pattern envisaged at appraisal with the implication of a lower ex post economic rate of return.

Can Project Appraisal be Linked with Growth Rate in the Economy?

In underdeveloped mixed economies, the choice of big investment projects has a direct bearing on the productivity of capital. The economic rate of return on big projects determines the achievable growth rate in the economy given the flow of investment. Ravindra Dholakia's argument is that project appraisal of such projects can and should be linked to the economy-wide growth target of the Planning Commission. Such a linkage would facilitate rigorous scrutiny of projects and demand more creative project design for achieving national goals.

Urban bound migration and rural investment: the case of Mexico.

The authors investigate an agriculturally based policy for improving rural incomes and for retarding the rural-urban migration flow. The production of agricultural goods is characterized by a production function in which output increases with increases in agricultural labor inputs, capital, public infrastructure, land, and technology. Differences among regions in agricultural technology will reflect regional differences in education, the institutionalized form of productive organization, and differences in access to technological information channeled through more technically advanced cities. To pick up the effect of out-migration changes in state agricultural labor supply and upon agricultural output, the state's agricultural out-migration rate is included together with the agricultural labor force. The gross migrant flow between 2 locations is hypothesized to depend upon a set of variables influencing the individual's perception of the economic rate of return to be gained by moving, a set of variables reflecting the individual's propensity to relocate, the labor displacement effects of investments, and the at risk population at 1 location available to migrate. It is also taken into account that individuals differ in their response to information about origin and destination wage differentials and that individuals may or may not perceive a new ecnomic gain from migration but may base the decision on other considerations. Results of a statistical analysis using data from the Mexican census of population for 1960 and 1970 are: 1) size of the rural labor force was negatively associated with agricultural wages, contrary to expectations; 2) small farmers have benefited from the expansion of irrigation in Mexico; and 3) higher urban wages attract migration, and higher growth rate of agricultural income retards rural-urban migration. With respect to the 1950-60 decade both agricultural income and rural out-migration impacts could have been substantial but both the impact on local urban growth and on the rate of in-migration to the primate city would have been slight.

The mulberry dike-carp pond resource system of the Zhujiang (Pearl River) Delta, People's Republic of China: I. Environmental context and system overview

Although not well understood scientifically, integrated and diversified aquaculture-agriculture systems have a history of some two millennia in parts of South and Southeast Asia. With the extremely limited farm area and scanty resources available to the typical small-scale farmer of these regions, integrated agro-ecosystems, based on generations of empirical knowledge, provide a balanced diet and often a small marketable surplus for poor rural households, while continuously recycling nutrients and energy through the system, producing little waste, and maintaining a local ecological balance. Despite the few scientific data available on such systems, they are being widely advocated for use in developing countries with no prior experience of integrated farming. This paper (paper I) describes the environmental context and provides an overview of the mulberry dike-polycultural carp pond resource system of Leliu Commune, in the Zhujiang Delta of the People's Republic of China, where complex and highly productive integrated farming systems are operated on a geographical and economic scale unmatched elsewhere. Subsequent papers will focus on the human ecology of the dike-pond system, the ecological basis for system integration, and the results and implications of experiments and trials for increasing the productivity of and the economic rate of return from the system.

Post-evaluation of fisheries projects

This article is concerned that the appraisal and post-evaluation of fisheries aid projects, while examining the financial rate of return (FRR) on the project, may make overoptimistic estimates of the economic rate of return (ERR). because they neglect to examine the resource base of the industry. Thus, under highly competitive conditions, especially if financial assistance is given to increase effort, a successful project may lead to overinvestment in the industry. thus threatening fish stocks, which the fisheries sector may not be able to prevent. Suggestions are made for widening the scope of post-evaluation so that policy measures emanating from outside the narrow confines of the fisheries sector may be implemented to prevent excessive growth of the industry.