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Cost-benefit analysis and the European union cohesion fund: On the social cost of capital and labour

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  • Massimo Florio

Abstract

Florio M. (2006) Cost-benefit analysis and the European Union Cohesion Fund: on the social cost of capital and labour, Regional Studies 40, 211-224. Cost-benefit analysis is a formal regulatory requirement for the evaluation of Cohesion Fund projects. It requires the calculation of shadow prices. Observed prices in less-developed European Union regions do not reflect the social opportunity cost of labour and capital because of market failures and policy constraints. The paper discusses simple rules for the calculation of financial and economic discount rates, and of shadow wages, i.e. the opportunity costs of capital and labour, in the context of the appraisal of infrastructure projects part-financed under the Cohesion Fund. It is argued that for the 2007-13 programming period, the European Commission should adopt a unique financial discount rate of 3.5% in real terms, social discount rates of 5.5% for the Convergence regions and 3.5% for Competitiveness regions, and a region-specific shadow wage rate. Cost-benefit analysis Social discount rate Shadow wage Cohesion Fund Florio M. (2006) L'analyse cout-benefice et le Fonds de cohesion de l'UE: a propos du cou t social du capital et du travail, Regional Studies 40, 211-224. L'analyse cout-benefice est une obligation legale prealable a l'evaluation des projets assistes par le Fonds de cohesion. Elle necessite le calcul des prix virtuels. Les prix observes dans les zones de l'UE en voie de developpement ne refletent le cou t d'opportunite social, ni du travail, ni du capital, a cause de la distorsion du marche et des contraintes de politique. Cet article cherche a discuter des regles simples visant le calcul des taux d'escompte financiers et economiques, et des salaires virtuels; autrement dit les cou ts d'opportunite du capital et du travail, dans le cadre de l'evaluation des projets d'equipement finances en partie sous l'egide du Fonds de cohesion. On affirme que, pour la periode de programmation 2007-13, la Commission europeenne devrait adopter un taux d'escompte financier unique de 3,5% en termes reels, des taux d'escompte sociaux de 5,5% pour les regions de convergence et de 3,5% pour les regions de l'Objectif 'competitivite', et un taux des salaires virtuels propre a chaque zone. Analyse cout-benefice Taux d'escompte social Salaire virtuel Fonds de cohesion Florio M. (2006) Kosten-Nutzenanalyse und der Kohasionsfond der EU: Bemerkungen zu den Sozialkosten von Kapital und Arbeit, Regional Studies 40, 211-224. Kosten-Nutzenanalyse ist ein formales beho rdliches Erfordernis fur die Evaluierung von Kohasionsfondprojekten. Es bedarf der Berechnung von 'Schattenpreisen'. In weniger entwickelten EU Regionen beobachtete Preise spiegeln nicht die sozialen Opportunitatskosten von Arbeit und Kapital wider aufgrund von Marktversagen und Policybedingten Einsdrankungen. Dieser Aufsatz bespricht einfache Regeln fur die Berechnung finanzieller und wirtschaftlicher Diskontsatze und fur Schattenlohne, d.h. die Opportunitatskosten von Kapital und Arbeit im Zusammenhang mit der Einschatzung von Infrastrukturprojekten, die vom Kohasionsfond teilfinanziert werden. Es wird der Standpunkt vertreten, dass die Europaische Kommission fur die Programmperiode 2007-2013 einen einmaligen Finanzdiskontsatz von effektiv 3,5% einfuhren sollte, einen sozialen Diskontsatz von 5,5% fur “Konvergenz” Regionen und 3,5% fur “Wettbewerbs” Regionen sowie einen bestimmten regionenspezifisch zugeschnittenen Schattenlohnsatz. Kosten-Nutzenanalyse sozialer Diskontsatz Schattenlohn Kohasionsfond Florio M. (2006) Analisis coste-beneficio y el Fondo de Cohesion de la UE: sobre el coste social de capital y trabajo, Regional Studies 40, 211-224. Los analisis de costes y beneficios son un requisito formal y reglamentario para llevar a cabo la evaluacion de los proyectos del Fondo de Cohesion. Requieren el calculo de los 'precios sombra'. En los precios de las regiones de la UE menos desarrolladas no queda reflejado el coste de oportunidad social de trabajo y capital debido a fallos de mercado y restricciones poli- ticas. Aqui se exponen reglas simples para el calculo de las tasas de descuento, segun un valor financiero y economico, y los 'salarios sombra', es decir, los costes de oportunidad de capital y trabajo, en el ambito de una valoracion de proyectos de infraestructura financiado en parte por el Fondo de Cohesion. Se sostiene que para el periodo de programacion 2007-2013, la Comision Europea deberia adoptar una tasa exclusiva de descuento financiero del 3,5% en terminos reales, tasas de descuento social del 5,5% para las regiones de Convergencia, un 3,5% para las regiones de Competitividad y una tasa especifica de salario sombra para cada region. Analisis de costes y beneficios Tasa de descuento social Salario sombra Fondo de cohesion

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Regional Studies.

Volume (Year): 40 (2006)
Issue (Month): 2 ()
Pages: 211-224

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Handle: RePEc:taf:regstd:v:40:y:2006:i:2:p:211-224

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Cited by:
  1. Massimo Florio & Emanuela Sirtori, 2013. "The social cost of capital: recent estimates for the EU countries," Working Papers 201303, Centre for Industrial Studies (CSIL).
  2. Caragliu, Andrea & Del Bo, Chiara, 2011. "Determinants of spatial knowledge spillovers in Italian provinces," Socio-Economic Planning Sciences, Elsevier, vol. 45(1), pages 28-37, March.
  3. Massimo FLORIO & Silvia VIGNETTI, 2009. "Building a bridge across CBA traditions: the contribution of EU Regional Policy," Departmental Working Papers 2009-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  4. Athena Roumboutsos, 2010. "Sustainability, Social Discount Rates and the Selection of Project Procurement Method," International Advances in Economic Research, Springer, vol. 16(2), pages 165-174, May.
  5. Ferda Halicioglu & Cevat Karatas, 2013. "A social discount rate for Turkey," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(2), pages 1085-1091, February.
  6. Nikolaos Thomopoulos & Susan Grant-Muller, 2013. "Incorporating equity as part of the wider impacts in transport infrastructure assessment: an application of the SUMINI approach," Transportation, Springer, vol. 40(2), pages 315-345, February.
  7. Andrea MAIRATE & Francesco ANGELINI, 2006. "Cost-benefit analysis and EU cohesion policy," Departmental Working Papers 2006-34, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

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