Identifying an Australian ‘Shadow’ Benefit / Cost Ratio for Public Projects
AbstractThis paper examines the social opportunity cost of a hypothetical public project in Australia and compares these values with the cost of the project as measured by factor prices. Since 2001, the Australian taxation system has included an ad valorem tax, the Goods and Services Tax, however relatively little analysis of the impact of this tax on public project evaluation methods has been undertaken. This tax creates divergences between social opportunity cost and conventional cost measures. Therefore it is recommended that shadow prices be applied to pubic projects. Following Campbell (1975), a shadow price can be introduced into Australian project evaluation in the form of a cut-off benefit cost ratio. The calculations reported on in the paper indicate that this ratio lies between 1 and 1.3 for public projects in Australia.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 13481.
Date of creation: 11 Feb 2009
Date of revision:
allocative efficiency; cost benefit analysis; efficiency; optimal taxation; project evaluation; social discount rate;
Other versions of this item:
- Lawrence, C, 2009. "Identifying an Australian 'Shadow' Benefit / Cost Ratio for Public Projects," MPRA Paper 13336, University Library of Munich, Germany.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-PBE-2009-02-28 (Public Economics)
- NEP-PPM-2009-02-28 (Project, Program & Portfolio Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Prof Harry Campbell & Assoc Prof Richard Brown, 2003.
"A Multiple Account Framework For Cost-Benefit Analysis,"
Discussion Papers Series
328, School of Economics, University of Queensland, Australia.
- Campbell, Harry F. & Brown, Richard P.C., 2005. "A multiple account framework for cost-benefit analysis," Evaluation and Program Planning, Elsevier, vol. 28(1), pages 23-32.
- John Creedy, 2007. "Discounting and the Social Time Preference Rate," Department of Economics - Working Papers Series 989, The University of Melbourne.
- Harry F. Campbell, 1975. "A Benefit/Cost Rule for Evaluating Public Projects in Canada," Canadian Public Policy, University of Toronto Press, vol. 1(2), pages 171-175, Spring.
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