Cost-Benefit Analysis

The estimation of benefits is what separates CBA and CEA and the analysis presented here requires explicitly noting all of the benefits to be included in the analysis as well as the monetary values of those benefits. All relevant project benefits should be noted. Since a societal perspective is taken in CBA for Bank funded projects, the benefits should include all societal benefits.

CHOOSING THE METHOD

The choice of method will depend on many factors.

The critical factors are four:

First

Whether a market exists or does not for the goods and services to be provided by the project. If there is a market, price can be elicited directly from published sources or from direct observation. If not, price information will have to be derived from either revealed or stated preferences.

Second

The nature of the Theory of Change. The logic of the intervention and the identified pathways through which the proposed intervention brings the expected impact are central in identifying the mechanisms by which those impacts can be monetized. A credible transition from outputs to outcomes and impacts will hinge on the quality of the assumptions embedded in the Theory of Change and this sequence and logic needs to be consistent with the step required to monetize impacts.

Third

The quality, availability and timeliness (how recent it is?) of the information/data required for benefit estimation.

Fourth

Sector specific considerations and standard professional practice.
Irrespective of the method, benefit estimation should be clearly linked to the logic chain: input→ output→ outcome→ impact (benefits) chain

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