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Cost-Benefit Analysis for Investment Decisions: Chapter 10 (Economic Prices for Tradable Goods and Services)

Author

Listed:
  • Glenn Jenkins

    (Queen's University, Canada and Eastern Mediterranean University, Cyprus)

  • Chun-Yan Kuo

    (Queen's University, Canada)

  • Arnold C. Harberger

    (University of California, Los Angeles, USA)

Abstract

In the integrated financial and economic analysis, there is a need to choose a numeraire in which all costs and benefits are expressed. The most common practice has been to express all costs and benefits in terms of domestic currency at a domestic price level. This is the natural rule to follow for the construction of the financial cash flow statement of a project that includes all the financial receipts and all the expenditures in each period throughout the duration of the project. When this numeraire is chosen to carry out the economic appraisal of the project it is necessary, however, to adjust the values of the transactions in the financial cash flow that involve internationally tradable goods because of distortions associated with the transactions of these goods and those that affect the market for foreign exchange. This chapter identifies the key distinct characteristics between tradable and non-tradable goods and provides a method for adjusting the financial values of tradable goods so that they reflect their economic values.

Suggested Citation

  • Glenn Jenkins & Chun-Yan Kuo & Arnold C. Harberger, 2011. "Cost-Benefit Analysis for Investment Decisions: Chapter 10 (Economic Prices for Tradable Goods and Services)," Development Discussion Papers 2011-10, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:203
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    References listed on IDEAS

    as
    1. Dinwiddy,Caroline L. & Teal,Francis J., 1996. "Principles of Cost-Benefit Analysis for Developing Countries," Cambridge Books, Cambridge University Press, number 9780521479165.
    2. Glenn Jenkins & Pastor T. Lorenzo Jr. & Theresa Panuccio, "undated". "The Visayas Communal Irrigation Project," Development Discussion Papers 1994-07, JDI Executive Programs.
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    Cited by:

    1. Vanino, Enrico & Lee, Stevan, 2018. "Extractive institutions in non-tradeable industries," Economics Letters, Elsevier, vol. 170(C), pages 10-13.
    2. Glenn P. Jenkins & Mikhail Miklyaev, 2013. "A Cost-Benefit Analysis Of Local Production Of Ready To Use Theraupetic Foods In Uganda," Development Discussion Papers 2012-05, JDI Executive Programs.
    3. Glenn P. Jenkins & Mikhail Miklyaev, 2014. "Cost-Benefit Analysis Of Small Holders' Lambs And Goats Fattening Activity In Ethiopia," Development Discussion Papers 2013-11, JDI Executive Programs.

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    More about this item

    Keywords

    tradable; non-tradable; importables; exportables; imports; exports; economic costs; economic benefits.;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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