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Does benefit/cost-efficiency influence transport investment decisions?

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Abstract

We explore how benefit-cost efficiency and electoral support affect road investment decisions in Sweden and Norway. In Norway, neither benefits nor costs seem to affect project selection. In Sweden, civil servants’ decisions are strongly affected by projects’ benefit-cost ratios, with a stronger effect for more expensive projects, while politicians’ decisions are only weakly affected, and only for small projects. In both countries, governments tend to favour investments in regions where they enjoy strong local electoral support. Using cost efficiency as a final selection criterion seems to filter out many inefficient projects already at an early stage of the planning process. We argue that even if political decisionmakers are apparently mostly governed by other concerns than cost efficiency, civil servants at the administrations should not shy away from preparing efficient project suggestions for decisionmakers to choose from.

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  • Eliasson, Jonas & Börjesson, Maria & Odeck, James & Welde, Morten, 2014. "Does benefit/cost-efficiency influence transport investment decisions?," Working papers in Transport Economics 2014:6, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  • Handle: RePEc:hhs:ctswps:2014_006
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    1. Jan Anne Annema & Carl Koopmans & Bert Van Wee, 2006. "Evaluating Transport Infrastructure Investments: The Dutch Experience with a Standardized Approach," Transport Reviews, Taylor & Francis Journals, vol. 27(2), pages 125-150, June.
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    Cited by:

    1. Andersson, Henrik & Hultkrantz, Lars & Lindberg, Gunnar & Nilsson, Jan-Eric, 2017. "The role of economic analysis for investment priorities in Sweden’s transport sector," Working papers in Transport Economics 2017:12, CTS - Centre for Transport Studies Stockholm (KTH and VTI), revised 23 May 2018.
    2. repec:kap:transp:v:44:y:2017:i:5:d:10.1007_s11116-016-9697-3 is not listed on IDEAS
    3. Asplund, Disa & Eliasson, Jonas, 2016. "Does uncertainty make cost-benefit analyses pointless?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 195-205.
    4. Mouter, Niek, 2017. "Dutch politicians’ attitudes towards Cost-Benefit Analysis," Transport Policy, Elsevier, vol. 54(C), pages 1-10.

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    Keywords

    Cost benefit analysis; Project appraisal; Public decision making; Transport investments;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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