Cost-benefit Analysis Methodology Research Articles

Determining Optimal Interconnection Capacity on the Basis of Hourly Demand and Supply Functions of Electricity

Interconnections for cross-border electricity trade improve price convergence and welfare. Increased production from variable renewables however implies higher levels of optimal interconnection capacity than in the past. Rather than using scenario building to determine new optimal levels of interconnection capacity, this paper presents a new methodology for Cost-Benefit Analysis (CBA) based on empirical market data, using the French-German electricity trade as an example. Employing a very fine dataset of hourly supply and demand curves (aggregated auction curves) from the EPEX Spot market, it constructs net export (NEC) and net import demand curves (NIDC) for both countries. This allows assessing hourly welfare impacts for incremental capacity and, summed over the year, the annual welfare benefits for each discrete increase in interconnection capacity. Confronting benefits with the annualised costs of increasing interconnection capacity determines the socially optimal increase in interconnection capacity between France and Germany on the basis of empirical market micro-data.

Economic and social yield of investing in hiking tourism: the case of Berguedà, Spain

ABSTRACTNature-based tourism is on the rise around the world. This article employs a cost–benefit analysis methodology to contribute to knowledge in this area by estimating both the economic impacts and the social costs and benefits of investing in hiking tourism. It includes tangible and non-tangible impacts, such as health benefits and CO2 emissions. Using data collected between March 15 2014 and March 14 2015, results show a positive return from every Euro invested in hiking tourism. A single figure of net returns to society enables policymakers to assess the social value of the investment itself and can help citizens’ rational choice regarding whether to encourage or resist additional tourism development.

ОСОБЕННОСТИ МЕТОДИКИ АНАЛИЗА ЗАТРАТ ДЛЯ МАГИСТРАЛЬНОГО ГРУЗОВОГО ЖЕЛЕЗНОДОРОЖНОГО ТРАНСПОРТА

Production cost is an important indicator of the industrial and economic activity of the organization. The amount of profit and profitability depends on cost optimization. The cost reflects all aspects of the enterprise: the degree of equipment of the production, operating capacity, material and labor resources. The article studies the aspects of analysis and cost optimization for the railway infrastructure in the Russian Federation. There have been revealed shortcomings in current practice for Distance of civil water supply and drainage facilities. The technique of optimization of cost analysis for the infrastructure of JSC "Russian Railways" is under consideration. The article offers an algorithm for cost-benefit analysis taking into account the peculiarities of railway transport under cost optimization. The authors highlight main factors affecting the costs of linehaul cargo railway transport, study stages of implementation of the cost analysis methods, which considers peculiarities of the railway transport. It can be inferred that using cost analysis methods the enterprise can control all costs as well as factors influencing them, which will help to find reserves for reducing costs and upgrading the quality of services offered by the Distance.The use of cost-benefit analysis methodology, taking into account the peculiarities of rail transport comply with the requirements of internal control in managing costs.

Assessment of Cost-Benefit Analysis for Offshore Electricity Infrastructure Development

The application of cost-benefit analysis (CBA) for offshore electricity infrastructure projects with a pan-European impact is discussed. An analytical framework for the evaluation of CBA methodologies is presented. The framework is then applied to assess the CBAs of three offshore infrastructure projects (EWIC, COBRAcable and ISLES). Overall, the CBAs assessed already comply with several dimensions of the analytical framework. However, based on this assessment it is found that scope for improvement in quality exists in three areas namely, in considering project interactions, in dealing with uncertainty and in making the results between CBAs comparable by ensuring full monetisation. Furthermore, the research also confirms the view that a common harmonised CBA methodology is essential for selection of PCIs.

Proposal of Economic Assessment of Hard Coal Mines Operation Conducted in Polish Conditions with the Use of Cost Benefit Analysis

Abstract The paper presents possibilities of an economic evaluation of hard coal mines, using Cost Benefit Analysis (CBA). Suggested methodology for CBA applied to the economic evaluation of a mine allows to conduct a complex evaluation of mine’s functionality in connection to Polish conditions. Additionally to financial aspects, significant from the point of view of the mine’s owner, the paper includes social and environmental effects as a result of mining activities. Proposed methodology has undergone tests which used averaged data obtained from two selected hard coal mines located in the Upper Silesian Coal Basin. Presented results confirm the validity of social costs and benefits, and environmental losses resulting from mining operation, which were included in analysis comprehensively evaluating the efficiency of hard coal mines.

How overwhelming is the evidence in favor of Road Diets? A note on the cost-benefit methodology proposed by Noland et al. (2015)

Writing in these pages, Noland and colleagues recently proposed a methodology for cost-benefit analysis of ‘Road Diets’ (re-design of the cross-section of a four-lane arterial). On the basis of the proposed procedures, the authors conclude that a Road Diet of an empirical case study (in New Brunswick, New Jersey, USA) would provide ‘overwhelming’ benefits. The study team has employed similarly unambiguous language in statements in other public fora. In this paper, I do not take a view of whether Road Diets are in general desirable or not (which will depend heavily on local context). Rather, I demonstrate here that the specification of benefits and costs in the proposed methodology is systematically biased (upwards in the case of ‘benefits’ and downwards in the case of ‘costs’). I also show that the authors mis-interpret public opinion regarding the proposed Road Diet; general public opinion cannot be known on the basis of the evidence that is presented to readers. Finally, it has been previously shown that transportation planners tend to, on average, systematically under-estimate costs and over-estimate benefits. While the authors’ motivations during the study at issue cannot be known, the systematic bias in specifying costs and benefits is consistent with Flyvbjerg’s ‘political-economic hypothesis’, in which it is theorized that planners strategically misrepresent costs and benefits in order to increase the likelihood of a politically-preferred project being advanced. Flyvbjerg suggests making independent peer reviews publicly available as part of a strategy to encourage accountability through transparency; this is the spirit in which the present paper is disseminated.

Adapted cost-benefit analysis methodology for innovative railway services

This paper reviews and adapts the methodology “Guide on the methodology for carrying out cost-benefit analysis” prepared by the European Commission (EC). It is specifically tailored to the assessment of an innovative rail freight service, and its application in the context of a number of potential service areas (principally pan European) in Europe. The SPECTRUM service is an innovative rail freight concept for the transport of low density high value (LDHV) goods. The methodology is primarily based on the “Guide to cost-benefit analysis of investment projects” of the European Commission. The cost definition takes input from a Life Cycle Cost analysis and applies a series of conversion factors. The benefits have been estimated considering the user’s surplus, i.e. the difference between Generalised Logistic Costs (GLC) borne by transport/logistics operators (and more in general freight transport service users) when using the SPECTRUM service and GLC connected to “pre-shift” mode, i.e. road or traditional rail; and the difference in external costs generated by freight transport activities connected to externalities such as air pollution and climate change, noise, accidents, and other externalities (up- and down-stream processes, nature and landscape, biodiversity losses, soil and water pollution, congestion). The adapted methodology has proven capable of representing the multiple effects resulting from the theoretical introduction of an innovative rail service in the freight transport sector - accounting for the differential impacts compared to the baseline scenario solutions. The logical articulation of the analysis is flexible; two specific estimation schemes (the estimation of ad hoc unit parameters for the external costs and ad hoc approach for using GLC as proxies of users’ surplus in a scenario where the introduction of the innovative service modifies the modal split of freight transport between different solutions) can be applied to other territorial contexts. It may also be used to evaluate other types of freight transport services, provided that some unit data can be retrieved, which pertain to site-specific cost of infrastructures, average speeds and rates of different transport solutions, costs of personnel and other operating costs.

Implications of an energy efficiency obligation scheme for the Swedish energy-intensive industries: an evaluation of costs and benefits

The EU Energy Efficiency Directive (EED) aims at improving energy efficiency by implementing actions in all sectors of the economy in the EU. Article 7 of the EED sets the target of 1.5 % cumulative annual energy end-use savings. An energy efficiency obligation scheme (EEO) is one of the policy mechanisms proposed to reach this target. This paper assesses the impact of implementing a Swedish EEO and the implications that such a scheme may have for Swedish energy-intensive industries. The assessment was based on cost-benefit analysis (CBA) methodology. The benefit-to-cost ratio (BCR) ranges from 1.56 to 2.17 and the break-even cost ranges from 83.3 to 86.9 €/MWh with sensitivity analyses performed for the emission allowance prices and eventual costs of the EEO. The annual energy savings potential is estimated to be 1.25 TWh/year. A Swedish EEO could motivate investments in energy efficiency measures and thus help Sweden reach the energy efficiency targets set in the EED.

Amartya Sen’s Capability Approach and Education: Enhancing Social Justice

Competition, a defining characteristic of Anglo-Saxon capitalist models, has shaped universities. Most higher education policies embrace the instrumental view of education, prioritising the development of human capital, with the ultimate objective of promoting economic growth. Added to this viewpoint, is the perspective of education as a right, which highlights its intrinsic value. This paper suggests that incorporating Amartya Sen’s Capability Approach when assessing higher education provides a broader, multi-criteria framework that answers the need for a normative ideal. Indeed, it focuses on social justice as the metric for evaluating and shaping universities. The paper, therefore, relies on the assumption that education needs to address not only the human capital needs of society, but also the development needs and aspirations of individuals as defined by the Capability Approach. The Capability Approach integrates social justice in the list of priorities and raises additional questions that go beyond the mainstream neoclassical boundary: how can universities contribute towards building a more just society, taking into account human dignity and wellbeing for all. Section one highlights the neoclassical economic theory underlying the competitive higher education models in Anglo-Saxon countries, where the human capital theory prevails. Education is also subject to the overarching cost-benefit analysis methodology, a perspective that is too narrow and instrumental to capture the complex realities it needs to address. Section two elaborates on the theoretical and conceptual insight Sen’s capability approach provides to capitalist economic models in general, and to university education in particular. It considers education as a right, but also as intrinsically important in many other ways. Furthermore, this approach sees the instrumental role of education in ways that surpass the neoclassical view, emphasising its transformative potential.

Investing In Industrial-Technology Parks In City Development - A Cost-Benefit Analysis

Abstract Cities are growing both quantitatively and qualitatively. The quantitative development of a city can be identified with the spatial expansion and changes in the function of certain areas. The city's development, therefore, requires the reconstruction of the spatial layout, but also needs certain capital expenditures, as exemplified by industrial-technology parks (ITPs). ITPs are a combination of the infrastructure function and performance which enable the exchange of information between scientific organizations and entrepreneurs. They are, therefore, a pro-development component of the urban development strategy. The aim of the study is to identify and quantify selected costs and benefits, as well as estimate the effectiveness of establishing certain parks from the point of view of local government units. Industry parks and technology parks are diverse entities. Their general characteristics and types, based on a review of domestic and foreign literature, are presented in the first part of the work justifying the study. The second part introduces the industrial-technology parks which are present in Poland. In the third part of the study, the specificity of assessing the effectiveness of an industrial-technology park is described. Finally, the fourth part includes an analysis of investing in selected industrial-technology parks; the analysis consists of three phases: the identification of industrial and technological parks, the verification of the industrial-technology park with the legal and practical definition, and cost-benefit analysis. According to the Polish Agency of Information and Foreign Investment (PAIiIZ), industrial-technology parks focus primarily on filling the space with commercially efficient companies using modern technologies, attracting investment and creating jobs. All of these factors are taken into account in the analysis. The analysis is carried out according to the methodology of cost-benefit analysis (CBA) of investment projects. Despite the diversity and dynamics of the structural features of the parks, the analysis confirms that the investment of public funds in industrial and technological parks is generally efficient in terms of socio-economic development.

Cost benefit analysis on Dzud-2010 disaster prevention grants programme in Mongolia

The Dzud, a climatic disaster which severely affects Mongolian herders, poses the most dangerous natural threat to the country’s rural economy. The negative impacts are loss of livestock (direct impact); human health, unemployment, poverty, migration (indirect impacts). Disaster Prevention Grants Programme funded by United Nations Development Programme to help with herders to reduce future Dzud vulnerability in Dundgobi, Uvurkhangai, Khovd province. This programme is beneficial for the herders on the basis of Cost Benefit Analysis methodology. The net present value of the project is 437.5 thousand dollars in seven years. We suggest that the herders should be prepared for the Dzud by preparing shelters, and hay harvest then these activities would generate more benefits of avoiding disaster damages than the costs. DOI: http://dx.doi.org/10.5564/mjas.v11i2.230 Mongolian Journal of Agricultural Sciences Vol.11(2) 2013 pp.110-119

The development of a public optometry system in Mozambique: a Cost Benefit Analysis.

BackgroundThe economic burden of uncorrected refractive error (URE) is thought to be high in Mozambique, largely as a consequence of the lack of resources and systems to tackle this largely avoidable problem. The Mozambique Eyecare Project (MEP) has established the first optometry training and human resource deployment initiative to address the burden of URE in Lusophone Africa. The nature of the MEP programme provides the opportunity to determine, using Cost Benefit Analysis (CBA), whether investing in the establishment and delivery of a comprehensive system for optometry human resource development and public sector deployment is economically justifiable for Lusophone Africa.MethodsA CBA methodology was applied across the period 2009–2049. Costs associated with establishing and operating a school of optometry, and a programme to address uncorrected refractive error, were included. Benefits were calculated using a human capital approach to valuing sight. Disability weightings from the Global Burden of Disease study were applied. Costs were subtracted from benefits to provide the net societal benefit, which was discounted to provide the net present value using a 3% discount rate.ResultsUsing the most recently published disability weightings, the potential exists, through the correction of URE in 24.3 million potentially economically productive persons, to achieve a net present value societal benefit of up to $1.1 billion by 2049, at a Benefit-Cost ratio of 14:1. When CBA assumptions are varied as part of the sensitivity analysis, the results suggest the societal benefit could lie in the range of $649 million to $9.6 billion by 2049.ConclusionThis study demonstrates that a programme designed to address the burden of refractive error in Mozambique is economically justifiable in terms of the increased productivity that would result due to its implementation.

A methodology for cost-benefit analysis of recycled asphalt pavement (RAP) in various highway applications

The purpose of this study is to determine which utilisation of recycled asphalt pavement (RAP) in various roadway applications is the most cost efficient. Using a method developed by the National Asphalt Pavement Association, a system was devised to assess the costs and benefits of using RAP in hot plant mix. A similar process was developed to evaluate the value of using RAP in gravel roads and bases. The system normalises all of the costs and benefits into savings per tonne of RAP as a means of equal comparison. Factors such as savings from dust loss, layer coefficients, haul and decreased need of virgin aggregates were taken into account. Finally, a case study was conducted using these three different applications. Such analysis can be used by other agencies interested in identifying the most cost-effective methods for using RAP in roadway construction.

Cost-Benefit Analysis and Distributional Weights: An Overview

Standard cost-benefit analysis (CBA) is insensitive to distributional concerns. A policy that improves the lives of the rich, and makes the poor yet worse off, will be approved by CBA as long as the policy’s aggregate monetized benefits are positive. Distributional weights offer an apparent solution to this troubling feature of the CBA methodology: adjust costs and benefits with weighting factors that are inversely proportional to the well-being levels (as determined by income and also perhaps non-income attributes such as health) of the affected individuals.Indeed, an academic literature dating from the 1950s discusses how to specify distributional weights. And the current official guidance document for governmental CBA in the U.K. recommends their use. However, CBA scholarship in the U.S. has usually ignored the possibility of distributional weights. The prevailing wisdom, in the U.S., seems to be that the specification of weights is hopelessly “value laden” and that distributional concerns are best handled through the tax system. There is no history of distributional weighting in the U.S. government. Although CBA is now entrenched in the federal regulatory bureaucracy, via OIRA review, distributional considerations — let alone the specific device of weights — are barely mentioned in OIRA guidance. This paper provides a systematic overview of the specification of distributional weights. It shows, in detail, how to “put structure” on the problem. Two kinds of weights are described: utilitarian weights, which correct for the diminishing marginal utility of money; and isoelastic/Atkinson weights, which embody an aversion to inequality in the distribution of well-being itself. Both kinds of weights can be captured in simple and quite implementable formulas. Although the choice to adjust CBA with weights does involve a contestable ethical/moral judgment, that is equally true of the decision to use CBA in the first place — which remains intensely controversial outside the community of economists.The paper illustrates the effect of weights by applying them to the “value of statistical life” (VSL), capturing individuals’ willingness to pay for fatality risk reduction. Richer individuals have higher VSL values, and this creates a policy dilemma: CBA with income-differentiated VSL can benefit the rich at the expense of the poor; but CBA with undifferentiated, population-average, VSL may require the poor to pay more than they can afford for risk reduction. I show how the use of distributionally weighted VSL values can greatly mitigate this dilemma.The paper also dissects the “tax system” objection to the use of weights. Although distributional weights would be unnecessary in an idealized economy with a lump-sum tax system, real-world taxation is beset by imperfections (administrative costs, incomplete governmental information, divided government) that create a space for weights. To be sure, in using distributional weights to assess non-tax policies, governmental decisionmakers should consider the possibility of tax-code changes that might produce yet greater weighted benefits. In other words, tax code changes (if feasible) should be on the “menu” of policy choices that are evaluated by means of distributionally weighted CBA. But this nuanced approach is quite different than the problematic view of the tax system as a distributional cure-all which rationalizes the practice of unweighted CBA. The main part of the paper is meant to be systematic and rigorously grounded but accessible. A lengthy formal appendix provides back-up.

An Appraisal of a River Cargo Transport Project

This paper provides evidence for the strength of the comprehensive analysis as an analytical tool to help the decision makers to improve their investment and operational strategies for river transportation projects. To do so, a River Cargo Transportation Company (RCTC) in Brazil was introduced and an integrated financial, economic, distributive and risk analysis was conducted to test the viability of the project. The analysis consists of identifying related financial and economic risk variables and performing the sensitivity analysis of these variables. The evaluation model of this project was based on a cost-benefit analysis methodology and a random calculation in which risk analysis was performed using Monte Carlo simulation. This integrated analysis provided a range of outcomes that can reduce the risk of uncertainty and give more reliable results than estimating the expected net present value or internal rate of return.

Sustainable Broadband: A Monitoring Framework for Broadband Policy in Rural Areas in the Netherlands

As General Purpose Technologies (GPTs) (Bresnahan & Trajtenberg, 1995), information and communication technologies (ICT) have been applied in different ways across companies and regions. The differences in ICT adoption across regions have been approached from a variety of perspectives, e.g. from the business users (Forman, 2005) and residential users point of view (Goldfarb & Prince, 2008) showing that regional differences are key characteristics of ICT growth. But these spatial disparities have to be approached with caution as technological characteristics of broadband are important to define rural areas (Grubesic & Murray, 2002). Even if rural areas in the European Union are defined according to technological and geographical dimensions (CEU, 2012), there is ample of room for a variety of interpretations by market parties and local governments. In case of (local) government intervention in broadband markets, there is a need to evaluate broadband initiatives with respect to their economic benefits in rural areas. In order to evaluate the economic impact of broadband, numerous studies in particular in the United States have been conducted to examine the link between broadband availability and a number of economic characteristics of rural regions (Connected Nation, 2008; Gilllett, Lehr, Osorio, & Sirbu, 2006; Whitacre, Gallardo, & Strover, 2013). Just recently the literature has focused on elements which will put broadband on a sustainable path, i.e. taking environmental implications of ICT into account (Ropke, 2012). A number of evaluation exercises of broadband programs have been conducted showing that “encouraging broadband adoption is only part of a larger digital literacy effort, and programs work when they make non-users want to connect, make the Internet cheaper and easier to use, and adjust to users’ preferences” (Hauge & Prieger, 2010). However, there currently there is no generally accepted monitoring framework that can be used to evaluate and monitor the (social) costs and benefits of broadband programs in rural areas. The paper contributes to the discussion in providing a monitoring framework for sustainable broadband in rural areas. This framework is developed by using the (social) cost-benefit analysis (SCBA) methodology applied to (all) large infrastructure programs in the Netherlands since 2003 (Eijgenraam, Koopmans, Tang, & Verster, 2000). This methodology is applied to investigate the implementation of broadband technologies in rural areas. In this context, a DPSIR scheme (originally developed as a framework for environmental indicators) is applied to monitor and a SCBA to evaluate the choice between the different alternatives (Eijgenraam, et al., 2000). As proposed by Ramirez (2007), such alternative monitoring framework is needed to evaluate economic progress in rural areas (Ramirez, 2007). As part of NGA networks (CEU, 2009, 2012), fiber technologies are increasingly considered by provincial governments in the Netherlands as the most future-proof technology of broadband infrastructure in rural areas. Different provinces in the Netherlands have set up large infrastructural broadband funds aimed at stimulating local economic development and bridging the digital divide between rural and urban areas (Provincie Noord-Brabant/ Dialogic, 2012; Provincie Overijssel, 2010). It is expected that fiber technologies will provide higher value-added to society (compared to traditional broadband technologies such as DSL or cable modem technologies) over the long term. For rural areas, these benefits have, in particular, been related to the arrival of e-health services, teleworking and the renewal of rural areas. For residential users, benefits from e-health services are emerging due to smart homes solution supporting greater self-reliance of the elderly which allow people to stay longer at home. For business users, benefits from teleworking are related to the reduction of travel time (Van der Wee et al., 2012). New NGA technologies can also support the renewal of rural areas (McGranahan & Wojan, 2007; Stephens & Partridge, 2011). To complicate matters, provincial governments are facing a number of options with respect to evaluating different project proposals for rural broadband. For example, to what extent do these proposals reflect the goals of provincial plans for rural areas (e.g. do they support renewal of rural areas; do they improve or enhance self-reliance of inhabitants?); to what extent do these proposal opt for the “right” NGA network technology?; do they support a competitive supply structure and new trans-sectoral services? In this context, a monitoring framework for broadband policy in rural areas in the Netherlands will provide more certainty with respect to interventions by provincial government, a better evaluation of the emerging (social) benefits and their allocation with respect to the different stakeholders in provincial programs.

Cost benefit analysis and ex-post evaluation for railway upgrade projects

Infrastructure investments have an important role in a country´s development, but the scarcity of resources in the current economic situation (world crisis) emphasizes the need for decision support tools. Several research projects have previously been carried out in order to improve the currently-used Cost-Benefit Analysis (CBA) methodology. CBA is a widely accepted and used decision support tool, even if it has its own shortcomings and drawbacks. The objective of this work is to assess the current limitations of CBA methodologies applied in Europe using cases in Hungary. It also collects and summarizes the main research and findings in the field of ex-post evaluation. Two Hungarian railway upgrade projects were evaluated economically. The change of CBA methodology had a more significant impact for the economic indicators, than the changes of the input parameters. In addition to the economic analysis, the financial losses were evaluated, since these projects caused significant disturbances for the operations during the construction period. There is a need for more ex-post evaluations carried out in railway upgrade projects in order to better understand their impacts.

Cost-Benefit Analysis and Distributional Weights: An Overview

Standard cost-benefit analysis (CBA) is insensitive to distributional concerns. A policy that improves the lives of the rich, and makes the poor yet worse off, will be approved by CBA as long as the policy’s aggregate monetized benefits are positive. Distributional weights offer an apparent solution to this troubling feature of the CBA methodology: adjust costs and benefits with weighting factors that are inversely proportional to the well-being levels (as determined by income and also perhaps non-income attributes such as health) of the affected individuals.Indeed, an academic literature dating from the 1950s discusses how to specify distributional weights. And the current official guidance document for governmental CBA in the U.K. recommends their use. However, CBA scholarship in the U.S. has usually ignored the possibility of distributional weights. The prevailing wisdom, in the U.S., seems to be that the specification of weights is hopelessly “value laden” and that distributional concerns are best handled through the tax system. There is no history of distributional weighting in the U.S. government. Although CBA is now entrenched in the federal regulatory bureaucracy, via OIRA review, distributional considerations — let alone the specific device of weights — are barely mentioned in OIRA guidance. This paper provides a systematic overview of the specification of distributional weights. It shows, in detail, how to “put structure” on the problem. Two kinds of weights are described: utilitarian weights, which correct for the diminishing marginal utility of money; and isoelastic/Atkinson weights, which embody an aversion to inequality in the distribution of well-being itself. Both kinds of weights can be captured in simple and quite implementable formulas. Although the choice to adjust CBA with weights does involve a contestable ethical/moral judgment, that is equally true of the decision to use CBA in the first place — which remains intensely controversial outside the community of economists.The paper illustrates the effect of weights by applying them to the “value of statistical life” (VSL), capturing individuals’ willingness to pay for fatality risk reduction. Richer individuals have higher VSL values, and this creates a policy dilemma: CBA with income-differentiated VSL can benefit the rich at the expense of the poor; but CBA with undifferentiated, population-average, VSL may require the poor to pay more than they can afford for risk reduction. I show how the use of distributionally weighted VSL values can greatly mitigate this dilemma.The paper also dissects the “tax system” objection to the use of weights. Although distributional weights would be unnecessary in an idealized economy with a lump-sum tax system, real-world taxation is beset by imperfections (administrative costs, incomplete governmental information, divided government) that create a space for weights. To be sure, in using distributional weights to assess non-tax policies, governmental decisionmakers should consider the possibility of tax-code changes that might produce yet greater weighted benefits. In other words, tax code changes (if feasible) should be on the “menu” of policy choices that are evaluated by means of distributionally weighted CBA. But this nuanced approach is quite different than the problematic view of the tax system as a distributional cure-all which rationalizes the practice of unweighted CBA. The main part of the paper is meant to be systematic and rigorously grounded but accessible. A lengthy formal appendix provides back-up.

Is law enforcement of drug-impaired driving cost-efficient? An explorative study of a methodology for cost–benefit analysis

BackgroundRoad users driving under the influence of psychoactive substances may be at much higher relative risk (RR) in road traffic than the average driver. Legislation banning blood alcohol concentrations above certain threshold levels combined with roadside breath-testing of alcohol have been in lieu for decades in many countries, but new legislation and testing of drivers for drug use have recently been implemented in some countries. MethodsIn this article we present a methodology for cost–benefit analysis (CBA) of increased law enforcement of roadside drug screening. This is an analysis of the profitability for society, where costs of control are weighed against the reduction in injuries expected from fewer drugged drivers on the roads. We specify assumptions regarding costs and the effect of the specificity of the drug screening device, and quantify a deterrence effect related to sensitivity of the device yielding the benefit estimates. ResultsThree European countries with different current enforcement levels were studied, yielding benefit–cost ratios in the approximate range of 0.5–5 for a tripling of current levels of enforcement, with costs of about 4000EUR per convicted and in the range of 1.5 and 13millionEUR per prevented fatality. ConclusionsThe applied methodology for CBA has involved a simplistic behavioural response to enforcement increase and control efficiency. Although this methodology should be developed further, it is clearly indicated that the cost-efficiency of increased law enforcement of drug driving offences is dependent on the baseline situation of drug-use in traffic and on the current level of enforcement, as well as the RR and prevalence of drugs in road traffic.

Cost-Benefit Analysis for Accident Prevention in Construction Projects

Construction is the most dangerous land-based work sector in Europe and the United States The cost of accidents has received much attention in the recent past, and online interactive tools were developed to assess the cost of accidents to organizations. Online tools and other sources of information on costs of accidents in the construction industry were a useful development but failed to support the decision-making process in regard to construction health and safety measures. A cost-benefit analysis (CBA) methodology is presented that would enable contractors to assess the true cost of accidents prevention and the associated benefits of accident prevention as part of pre- and postcontract project evaluation. The research investigated the cost and benefit of accident prevention, with a view to drawing attention to the economic consequences of effective/ineffective management of health and safety by contractors. A quantitative research methodology was employed in investigating these costs and benefits within the UK construction industry. The results of ratio analyses indicate that the benefits of accident prevention far outweigh the costs of accident prevention by a ratio of approximately 3∶1. Further, the results demonstrate that for every £1 spent on accident prevention, contractors gained £3 as benefits. The results also show that small contractors spend relatively higher proportions of their turnover on accident prevention than medium- and large-sized contractors and that small- and medium-sized contractors gain relatively higher proportions of their turnover, in total, as benefits of accident prevention than large contractors. It is concluded that the CBA method can provide a guide to contractor’s decision making in regard to accident prevention. When acted upon, the method has the potential to contribute to a reduction in costs, deaths, and injuries in the UK construction industry and possibly in other areas internationally.