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Dynamic cost-benefit analysis of large projects: The role of capital cost

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  • Li, Chuan-Zhong
  • Löfgren, Karl-Gustaf

Abstract

This paper derives a dynamic cost-benefit rule for evaluating large projects. We show that, in addition to the conventional income and consumer surplus measures, the rule also entails an extra term involving capital cost changes.

Suggested Citation

  • Li, Chuan-Zhong & Löfgren, Karl-Gustaf, 2010. "Dynamic cost-benefit analysis of large projects: The role of capital cost," Economics Letters, Elsevier, vol. 109(2), pages 128-130, November.
    • Handle: RePEc:eee:ecolet:v:109:y:2010:i:2:p:128-130
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    1. Avinash Dixit & Peter Hammond & Michael Hoel, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 551-556.
    2. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(4), pages 647-685, December.
    3. Asheim, Geir B., 2000. "Green national accounting: why and how?," Environment and Development Economics, Cambridge University Press, vol. 5(1), pages 25-48, February.
    4. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989, Elsevier.
    5. Martin L. Weitzman, 2001. "A Contribution to the Theory of Welfare Accounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 1-23, March.
    6. Chuan-Zhong Li & Karl-Gustaf Löfgren, 2008. "Evaluating Projects in a Dynamic Economy: Some New Envelope Results," German Economic Review, Verein für Socialpolitik, vol. 9, pages 1-16, February.
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    Cited by:

    1. Collins, Ross D. & Selin, Noelle E. & de Weck, Olivier L. & Clark, William C., 2017. "Using inclusive wealth for policy evaluation: Application to electricity infrastructure planning in oil-exporting countries," Ecological Economics, Elsevier, vol. 133(C), pages 23-34.

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    More about this item

    Keywords

    Cost-benefit rule Large project Capital cost;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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