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Getting Incentives Right: do we need ex post CBA?

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Abstract

This paper, presented at the Sixth European Conference on Evaluation of Cohesion Policy (Warsaw, 30 November-1 December 2009), discusses why there is a strong need of ex-post Cost-Benefit analysis and which conditions should be met for a proper ex-post exercise to be carried out in the framework of Cohesion Policy major projects. After an introduction about the objectives and instruments of the 2007-2013 EU Cohesion Policy, and in particular the legal framework for co-financing environmental and transport projects, the paper illustrates and discusses some methodological choices which have been made by the authors of the EC CBA Guide. It is showed that, without an ex-post Cost-Benefit analysis, the ex-ante exercise is also weakened as a decision making tool. In particular, in the light of evidence from literature about the most common mistakes and pitfalls in ex-ante project appraisal, it is explained how systematic ex-post evaluation is important in particular linked to ex-ante incentives to reveal true information about the projects characteristics (especially on investment costs and demand forecast which are often respectively under and overestimated due to an optimism bias) and ex-post performance assessment. The EC has a unique role to play in this context, and recommendations are given about how to improve the use of CBA for investment decisions and how to contract co-funding of major projects in the framework of incentive theory.

Suggested Citation

  • Massimo Florio & Davide Sartori, 2010. "Getting Incentives Right: do we need ex post CBA?," Working Papers 201001, CSIL Centre for Industrial Studies.
    • Handle: RePEc:mst:wpaper:201001
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    File URL: https://www.csilmilano.com/docs/WP2010_01.pdf
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    Cited by:

    1. Chiara Pancotti & Matteo Pedralli & Geert Smit & Silvia Vignetti, 2020. "Understanding transport project appraisal in its institutional dimension," Working Papers 201902, CSIL Centre for Industrial Studies.
    2. Martin Ferry, 2013. "Implementing Regional Policy in Poland: A New Era?," Europe-Asia Studies, Taylor & Francis Journals, vol. 65(8), pages 1578-1598, October.
    3. Osama Ahmed & Walid Sallam, 2020. "Assessing the Potential of Improving Livelihoods and Creating Sustainable Socio-Economic Circumstances for Rural Communities in Upper Egypt," Sustainability, MDPI, vol. 12(16), pages 1-23, August.
    4. Knudsen, M.Aa. & Rich, J., 2013. "Ex post socio-economic assessment of the Oresund Bridge," Transport Policy, Elsevier, vol. 27(C), pages 53-65.
    5. Gómez-Lobo Andrés, 2012. "Institutional Safeguards for Cost Benefit Analysis: Lessons from the Chilean National Investment System," Journal of Benefit-Cost Analysis, De Gruyter, vol. 3(1), pages 1-30, January.
    6. Massimo Florio & Silvia Vignetti, 2013. "The use of ex post Cost-Benefit Analysis to assess the long-term effects of Major Infrastructure Projects," Working Papers 201302, CSIL Centre for Industrial Studies.

    More about this item

    Keywords

    CBA; Cohesion Policy; Incentives;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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