Applied Welfare Economics: Cost-Benefit Analysis for Project and Policy Evaluation presents a consistent framework for applied welfare economics and is grounded in a comprehensive theory of cost-benefit analysis, specifically focused on offering a practical approach to policy and project evaluation. After opening with a theoretical discussion of the concept of social welfare, a critical analysis of the traditional doctrine of welfare economics embodied in the Two Fundamental Theorems, and a presentation of social cost-benefit analysis, the book introduces readers to an applied framework. This includes the empirical estimation of shadow prices of goods, the social cost of labour and capital, and the assessment of risk. The book also examines real-life experiences with cost-benefit analysis, including ex-post evaluation of major projects, economic rates of return in different sectors, and a case study on privatisation. These chapters draw on first-hand research gained by the author team from years of advisory work for the European Commission and other international and national institutions. This second edition presents updated data, more international examples, and more coverage of topics such as very long run discounting effects and climate change as an intergenerational effect. It also includes more practical examples and end-of-chapter questions to aid student’s learning. Applied Welfare Economics is a valuable textbook for upper-level courses on welfare economics, cost-benefit analysis, public policy analysis and related areas.
Author(s): Massimo Florio, Chiara Pancotti
Series: Routledge Advanced Texts In Economics And Finance | 38
Edition: 2
Publisher: Routledge | Taylor & Francis Group
Year: 2023
Language: English
Commentary: TruePDF
Pages: 361
Tags: Welfare Economics; Cost Effectiveness
Cover
Half Title
Series Page
Title Page
Copyright Page
Table of Contents
List of Figures
List of Tables
List of Boxes
Preface
Acknowledgements
Abbreviations
Main notation
PART ONE Theory
1 On social welfare
Overview
1.1 The concept of social welfare
1.2 The welfare assumptions behind GDP and NNP
1.3 Individual and social welfare
1.4 Determinants of individual welfare: goods
1.5 Determinants of social welfare: individual utilities
1.6 Sen’s critique of individualistic Social Welfare Function
1.7 Paternalism and not (only) individualistic Social Welfare Functions
1.8 Happiness Economics
1.9 ‘Positive’ analysis
1.10 Further reading
1.11 Summary of Chapter 1
End chapter questions
2 The two fundamental theorems re-examined
Overview
2.1 Theorems versus intuitions
2.2 The Arrow–Debreu (AD) economy
2.3 The axiomatic structure
2.4 Consumers, producers, and government: objectives and constraints
2.5 The Walrasian equilibrium
2.6 The two theorems without ideology
2.7 The critiques by Stiglitz to the theorems
2.8 Critical analysis of the Second Theorem
2.9 The government rediscovered in second-best economies
2.10 Further reading
2.11 Summary of Chapter 2
End chapter questions
Appendix 2.1 Policies based on the Second Theorem
3 Shadow prices and the social planner
Overview
3.1 Introductory remarks
3.2 A model for project and policy evaluation
3.3 A second-best economy in the DS frame
3.4 Policy reforms and shadow prices
3.5 Multi-government setting
3.6 Why use shadow prices?
3.7 Further reading
3.8 Summary of Chapter 3
End chapter questions
Appendix 3.1 Some results from Drèze and Stern (1987)
PART TWO Empirics
4 The social cost of goods
Overview
4.1 Observed prices and financial analysis
4.2 Accounting prices and economic analysis
4.3 Empirical approaches for guessing accounting prices
4.4 The border price rule for tradable goods
4.5 The Standard Conversion Factor
4.6 The long-run marginal cost
4.7 Willingness-to-pay
4.8 Further reading
4.9 Summary of Chapter 4
Questions
Appendix 4.1 Financial analysis
Appendix 4.2 An example of financial and economic analysis
5 The social cost of labour
Overview
5.1 Earlier literature on the social opportunity cost of labour
5.2 A conceptual model for the social cost of labour
5.3 The shadow wage rate and labour market conditions
5.4 Empirical estimation of shadow prices for EU regions
5.5 Further reading
5.6 Summary of Chapter 5
End of chapter questions
6 The social cost of capital
Overview
6.1 Rationale for discounting
6.2 Estimating the social discount rate
6.3 The social discount rate as a function of time
6.4 Empirical estimates of the social discount rate
6.5 The opportunity cost of public funds
6.6 Further reading
6.7 Summary of Chapter 6
End of chapter questions
7 Welfare weights and distributional impacts
Overview
7.1 Why are equity considerations needed in CBA?
7.2 Deriving welfare weights
7.3 Estimation of distributional weights
7.4 The distributional characteristic of goods
7.5 Group and regional welfare weights
7.6 Basic needs and social affordability
7.7 Further reading
7.8 Summary of Chapter 7
End of chapter questions
8 Risk assessment
Overview
8.1 Rationale of the risk assessment
8.2 Definitions and concepts
8.3 Historical background: the World Bank model
8.4 Sensitivity analysis
8.5 Probability analysis
8.6 Risk analysis
8.7 Further reading
8.8 Summary of Chapter 8
End of chapter questions
Appendix 8.1 Distributions of probabilities
Appendix 8.2 Monte Carlo method
Appendix 8.3 Generating correlated random numbers
PART THREE Experience
9 International evaluation practices
Overview
9.1 National traditions and operative guidelines
9.2 The use of cost-benefit analysis in the EC regional policy
9.3 Multilateral development banks
9.4 Further reading
9.5 Summary of Chapter 9
End of chapter questions
10 Ex-post project evaluation
Overview
10.1 Timing and scope of CBA
10.2 Performing ex-post CBA
10.3 International practice of ex-post CBA
10.4 CBA and the decision-making process
10.5 Interpretation of variability of ex-ante vs ex-post or re-estimated internal rates of return
10.6 Comparison between ex-ante and ex-post economic rates of return
10.7 CBA and incentives
10.8 Further reading
10.9 Summary of Chapter 10
End of chapter questions
11 The use of cost-benefit analysis in regulatory policy
Overview
11.1 Adopting CBA for regulatory impact assessment: rationale and main elements
11.2 International practices
11.3 A key tool for good governance? Some critical considerations
11.4 Further reading
11.5 Summary of Chapter 11
End of chapter questions
Bibiography
Index
