Cost-Benefit Analysis and the Rates of Return of Development Projects: An Intenational Comparison

Centro Studi Luca d'Agliano Development Studies Working Papers No. 182

35 Pages Posted: 20 Apr 2004

See all articles by Massimo Florio

Massimo Florio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Date Written: December 2003

Abstract

In this paper we analyse data on the rates of return of investment projects sponsored by three international institutions: the European Union, the European Bank for Reconstruction and Development, the World Bank. The focus of the paper is on the evaluation of the variability of ex-ante economic rates of return, of financial rates of return and ex-post or re-estimated economic rates of return. We propose a framework of analysis of rates of return variations across projects, sectors, financing institutions, of the wedge between economic and financial, and of the gap between ex-ante and ex-post returns. In principle the same framework could be used for comparing rates of return variability of development projects across countries, time of approval or exit, or other relevant sampling criterion. We discover a pattern of variations across sectors. And we find that cost-benefit analysis generates larger variability of rates of return than financial analysis.

Keywords: Investment projects, International institutions, Rates of return, ost-benefit analysis

JEL Classification: D61, H54, O22

Suggested Citation

Florio, Massimo, Cost-Benefit Analysis and the Rates of Return of Development Projects: An Intenational Comparison (December 2003). Centro Studi Luca d'Agliano Development Studies Working Papers No. 182, Available at SSRN: https://ssrn.com/abstract=532442 or http://dx.doi.org/10.2139/ssrn.532442

Massimo Florio (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

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