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Evaluating Projects in a Dynamic Economy: Some New Envelope Results
Dalarna University, School of Technology and Business Studies, Economics.
2008 (English)In: The German Economic Review, ISSN 1465-6485, E-ISSN 1468-0475, Vol. 9, no 1, 1-16 p.Article in journal (Refereed) Published
Abstract [en]

This paper is concerned with the modern theory of social cost-benefit analysis in a dynamic economy. The theory emphasizes the role of a comprehensive, forward-looking, dynamic welfare index within the period of the project rather than that of a project's long-term consequences. However, what constitutes such a welfare index remains controversial in the recent literature. In this paper, we attempt to shed light on the issue by deriving three equivalent cost-benefit rules for evaluating a small project. In particular, we show that the direct change in net national product (NNP) qualifies as a convenient welfare index without involving any other induced side effects. The project evaluation criterion thus becomes the present discounted value of the direct changes in NNP over the project period. We also illustrate the application of this theory in a few stylized examples.

Place, publisher, year, edition, pages
Verein für Socialpolitik and Blackwell , 2008. Vol. 9, no 1, 1-16 p.
Keyword [en]
dynamic cost-benefit analysis, net national product, project evaluation, welfare index.
Identifiers
URN: urn:nbn:se:du-2406OAI: oai:dalea.du.se:2406DiVA: diva2:519744
Available from: 2006-12-06 Created: 2006-12-06 Last updated: 2012-04-24Bibliographically approved

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Li, Chuan-Zhong
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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf