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Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects

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  • Pohl, Gerhard
  • Mihaljek, Dubravko

Abstract

This article analyzes the World Bank's experience with project evaluation for a sample of l,015 projects by comparing estimated rates of return at appraisal with reestimated rates of return when construction works are completed, usually 5 to 10 years after appraisal. The analysis highlights the high degree of uncertainty in project analysis. A wide range of variables has been introduced to explain the observed divergence in appraisal and reestimated rates of return, but only a relatively small part of the divergence can be explained, even with the benefit of hindsight. Project analysis thus has to cope with a large degree of uncertainty, which the traditional methods of project evaluation and selection have not been able to reduce. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Pohl, Gerhard & Mihaljek, Dubravko, 1992. "Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects," The World Bank Economic Review, World Bank, vol. 6(2), pages 255-277, May.
  • Handle: RePEc:oup:wbecrv:v:6:y:1992:i:2:p:255-77
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