Applied Welfare Economics: Cost-Benefit Analysis of Projects and Policies (Routledge Advanced Texts in Economics and Finance)

__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. 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 "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, of the social cost of labour and capital, the assessment of risk. This book also discusses the state of the art of international experience with CBA, including ex-post evaluation of major projects, and the use of cost-benefit analysis in regulatory policy. The empirical chapters draw from first-hand research, gained by the authors and his collaborators over many 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. It also includes 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"-- Provided by publisher