IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/37591.html
   My bibliography  Save this paper

On non-marginal cost-benefit analysis

Author

Listed:
  • Dietz, Simon
  • Hepburn, Cameron

Abstract

Conventional cost-benefit analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal in the sense that it will not significantly change relative prices. In particular, it is assumed that the policy or project does not change the underlying growth rate of the economy. However, these assumptions may be inappropriate in some important circumstances, such as large development projects in small economies, or large-scale infrastructure investment programmes. This paper develops the theory on the evaluation of non-marginal policies and projects, with an empirical application to the mitigation of global climate change. We examine the conditions under which evaluation of a non-marginal project using marginal methods may be both qualitatively and quantitatively wrong, and explore the magnitude of the potential error using a commonly employed integrated assessment model of climate change.

Suggested Citation

  • Dietz, Simon & Hepburn, Cameron, 2010. "On non-marginal cost-benefit analysis," LSE Research Online Documents on Economics 37591, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:37591
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/37591/
    File Function: Open access version.
    Download Restriction: no

    Other versions of this item:

    More about this item

    Keywords

    Cost-benefit analysis; non-marginal; project appraisal; discount rate; infrastructure investment; climate change; hydropower dam;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:37591. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager). General contact details of provider: http://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.