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Public Expenditure Efficiency Analysis Based On Cost Benefit Analysis

Author

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  • Diana Mihaiu

    (Lucian Blaga University of Sibiu)

Abstract

Measuring the effectiveness of the public expenditure is essential in the analysis of the public sector’s performance, the efficiency being an indicator of the performance. Cost benefit analysis is a method of measuring the efficiency of public spending, but has certain deficiencies, which we reported in the paper. The purpose of the cost-benefit analysis is to show, based on the results expected, if the investment, hence the public expenditure, is appropriate or not, and to lead to identifying the best choice, the one with the highest efficiency. The cost – benefit analysis must take into account all the benefits, not just the economical ones, based on the economical, social and environmental impact studies, then trying a monetary quantification of the effects, although in some areas this is more difficult to realize; so that eventually it can be concluded if the investment is worthwhile and if it brings a contribution to increasing the social welfare. The cost-benefit analysis is an effective tool for making decisions regarding spending the public money in the public sector, but which may have some errors, such as errors of omission, of forecasting, of evaluation and measurement. The quality and accuracy of the CBA depends also on the skill and good will of the analyst and on the complexity of the project. The cost-benefit analysis offers great results regarding the investments that have a strong economical component, or whose costs and benefits can be easily quantified.

Suggested Citation

  • Diana Mihaiu, 2010. "Public Expenditure Efficiency Analysis Based On Cost Benefit Analysis," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 5(1), pages 113-125, april.
  • Handle: RePEc:blg:journl:v:5:y:2010:i:1:p:113-125
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