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Indirect Distributional Effects in Benefit-Cost Analysis of Small Projects

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  • Wildasin, David E

Abstract

Small public projects perturb the equilibrium prices of many commodities, generating small real income changes ("pecuniary externalities") for many households. The analy sis of this paper shows that even extremely small price changes (on t he order of 1016) can have distributional effects that are far from n egligible (e.g., 10 percent of project outlays). It is shown that, at least in some simple cases, the benefit-cost analyst can accommodate these effects without measuring the actual price changes if certain key empirical parameters (such as demand and supply elasticities) are known. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Wildasin, David E, 1988. "Indirect Distributional Effects in Benefit-Cost Analysis of Small Projects," Economic Journal, Royal Economic Society, vol. 98(392), pages 801-807, September.
  • Handle: RePEc:ecj:econjl:v:98:y:1988:i:392:p:801-07
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    Cited by:

    1. Elio H Londero, 2004. "Measuring Benefits, Tracing Distributional Effects, and Affecting Distributional Outcomes," Public Economics 0407011, University Library of Munich, Germany.
    2. Hom M. Pant, 1996. "Technical Change, Pecuniary Externality and the Market Failure," GE, Growth, Math methods 9609001, University Library of Munich, Germany, revised 30 Apr 1997.
    3. Elio H Londero, 2004. "Poverty Targeting Classifications and Distributional Effects," Public Economics 0407012, University Library of Munich, Germany.
    4. Liqun Liu, 2004. "The Marginal Cost of Funds and the Shadow Prices of Public Sector Inputs and Outputs," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(1), pages 17-29, January.

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