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Beyond Rate of Return: Reorienting Project Appraisal

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  • Devarajan, Shantayanan
  • Squire, Lyn
  • Suthiwart-Narueput, Sethaput

Abstract

Traditional approaches to project appraisal fail in practice to address two fundamental questions: whether a project belongs in the public or the private sector; and what effect any external assistance associated with the project has on the country's development. The first issue is of general interest to both national policymakers and international donors. If the government provides a good or service that would otherwise have been provided by the private sector, the net contribution of the public project could be low. The second issue is of particular concern to donors. If financial resources are fungible, the project being appraised might well have been undertaken without external financing. In this case, donor funds are actually financing some other, unappraised project. Both cases argue for a shift in the emphasis of project evaluation away from a concern with precise rate-of-return calculations and toward broader sectoral analyses and public expenditure reviews. In this context, three areas critical for proper project appraisal include a consideration of the rationale for public intervention, the fiscal impact of the project, and the fungibility of external assistance.

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Bibliographic Info

Article provided by World Bank Group in its journal World Bank Research Observer.

Volume (Year): 12 (1997)
Issue (Month): 1 (February)
Pages: 35-46

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Handle: RePEc:oup:wbrobs:v:12:y:1997:i:1:p:35-46

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  1. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  2. Pack, Howard & Pack, Janet Rothenberg, 1990. "Is Foreign Aid Fungible? The Case of Indonesia," Economic Journal, Royal Economic Society, vol. 100(399), pages 188-94, March.
  3. Squire, Lyn, 1989. "Project evaluation in theory and practice," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 21, pages 1093-1137 Elsevier.
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Cited by:
  1. Mark Schreiner, 2001. "Microenterprise in the First and Third Worlds," Development and Comp Systems 0108001, EconWPA, revised 27 Dec 2001.
  2. Arne Wiig & Ivar Kolstad, 2003. "Lowering barriers to agricultural exports through technical assistance," CMI Working Papers WP 2003:8, CMI (Chr. Michelsen Institute), Bergen, Norway.
  3. James E. Anderson & Will Martin, 2011. "Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 289-309, 04.
  4. Devarajan, Shantayanan & Rajkumar, Andrew Sunil & Swaroop, Vinaya, 1999. "What does aid to Africa finance?," Policy Research Working Paper Series 2092, The World Bank.
  5. Martin, Will & Anderson, James E., 2005. "Costs of taxation and the benefits of public goods : the role of income effects," Policy Research Working Paper Series 3700, The World Bank.
  6. Pritchett, Lant & Samji, Salimah & Hammer, Jeffrey, 2012. "It.s All About MeE: Using Structured Experiential Learning (.e.) to Crawl the Design Space," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Anderson, James E. & Martin, Will, 1998. "Evaluating public expenditures when governments must rely on distortionary taxation," Policy Research Working Paper Series 1981, The World Bank.
  8. Mark Schreiner & Jacob Yaron, 2001. "Development Finance Institutions : Measuring Their Subsidy," World Bank Publications, The World Bank, number 13983, October.
  9. Suthiwart-Narueput, Sethaput, 1998. "The economic analysis of sector investment programs," Policy Research Working Paper Series 1973, The World Bank.
  10. Mark Schreiner, 2001. "Evaluation and Microenterprise Programs," Development and Comp Systems 0108002, EconWPA, revised 27 Dec 2001.
  11. Lyn Squire, 1998. "Professor Mirrlees' Contribution to Economic Policy," International Tax and Public Finance, Springer, vol. 5(1), pages 83-91, February.
  12. Schreiner, Mark & Woller, Gary, 2003. "Microenterprise Development Programs in the United States and in the Developing World," World Development, Elsevier, vol. 31(9), pages 1567-1580, September.
  13. Takis Venetoklis, 2002. "Public Policy Evaluation: Introduction to Quantitative Methodologies," Research Reports 90, Government Institute for Economic Research Finland (VATT).

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