IDEAS home Printed from https://ideas.repec.org/a/kap/ecopln/v38y2005i3p179-210.html
   My bibliography  Save this article

Cost-benefit Analysis of Infrastructure Projects in an Enlarged European Union: Returns and Incentives

Author

Listed:
  • Massimo Florio
  • Silvia Vignetti

Abstract

We consider results of cost-benefit analysis (CBA) in a large sample of ISPA (Structural Instrument for Pre-Accession countries) projects co-financed by the European Union to support investment in transport and environment. The research focus is on the empirical analysis of the variability of financial and economic rates of return and how to integrate this information in the EU co-financing mechanism. We investigate to what extent the variability of expected returns and of EU co-financing rates is due to structural project characteristics (sectors, countries) or to other unexplained factors, including errors in the appraisal. We find that while the absolute level of grants is related to sectors, the EU co-financing rate depends on countries. There is no justification in economic analysis of such a country bias, because the variability of economic rate of returns is unrelated either to sector or country factors. These findings points to the need of a more consistent approach to evaluation and EU co-financing of infrastructure supported by the EU funds. We suggest possible improvements, based on the idea to offer an incentive to projects with high-expected economic␣rates of return relative to a benchmark and showing ex-post the realism of the initial analysis. Copyright Springer Science+Business Media, LLC 2005

Suggested Citation

  • Massimo Florio & Silvia Vignetti, 2005. "Cost-benefit Analysis of Infrastructure Projects in an Enlarged European Union: Returns and Incentives," Economic Change and Restructuring, Springer, vol. 38(3), pages 179-210, December.
    • Handle: RePEc:kap:ecopln:v:38:y:2005:i:3:p:179-210
    DOI: 10.1007/s10644-006-9002-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10644-006-9002-0
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10644-006-9002-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. César Calderón & Alberto Chong, 2004. "Volume and Quality of Infrastructure and the Distribution of Income: An Empirical Investigation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 87-106, March.
    2. de la Fuente, Angel, 2002. "On the sources of convergence: A close look at the Spanish regions," European Economic Review, Elsevier, vol. 46(3), pages 569-599, March.
    3. César Calderón & Luis Servén, 2004. "The Effects of Infrastructure Development on Growth and Income Distribution," Working Papers Central Bank of Chile 270, Central Bank of Chile.
    4. Massimo FLORIO & Silvia VIGNETTI, 2004. "Cost benefit analysis, developing planning and the EU cohesion fund: learning from experience," Departmental Working Papers 2004-31, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    5. John Bradley, 2006. "Evaluating the impact of European Union Cohesion policy in less-developed countries and regions," Regional Studies, Taylor & Francis Journals, vol. 40(2), pages 189-200.
    6. repec:bla:rdevec:v:1:y:1997:i:2:p:219-35 is not listed on IDEAS
    7. repec:hal:spmain:info:hdl:2441/2095 is not listed on IDEAS
    8. Alfredo M. Pereira, 1997. "Development Policies in the EU: An International Comparison," Review of Development Economics, Wiley Blackwell, vol. 1(2), pages 219-235, June.
    9. Gillian Bristow & Nigel Blewitt, 2001. "The Structural Funds and Additionality in Wales: Devolution and Multilevel Governance," Environment and Planning A, , vol. 33(6), pages 1083-1099, June.
    10. Boldrin, Michele & Canova, Fabio, 2003. "Regional Policies and EU Enlargement," CEPR Discussion Papers 3744, C.E.P.R. Discussion Papers.
    11. Massimo Florio, 1997. "The economic rate of return of infrastructures and regional policy in the European Union," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 68(1), pages 39-64, March.
    12. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521840187, September.
    13. Frank Barry & John Bradley & Aoife Hannan, 2001. "The Single Market, the Structural Funds and Ireland's Recent Economic Growth," Journal of Common Market Studies, Wiley Blackwell, vol. 39(3), pages 537-552, September.
    14. Massimo Florio, 1999. "An International Comparison of the Financial and Economic Rate of Return of Development Projects," Departmental Working Papers 1999-06, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chiara F. Del Bo & Massimo Florio, 2011. "Infrastructure and Growth in a Spatial Framework: Evidence from the EU regions," European Planning Studies, Taylor & Francis Journals, vol. 20(8), pages 1393-1414, October.
    2. Zaman Gheorghe & Vasile Valentina & Cristea Anca, 2012. "Sustainable Development Challenges And Fdi Impact In Host Countries," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 444-460, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Massimo FLORIO & Silvia VIGNETTI, 2003. "Cost-benefit analysis of infrastructure projects in an enlarged European Union: an incentive-oriented approach," Departmental Working Papers 2003-13, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    2. Pedro R. D. Bom & Aitor Goti, 2018. "Public Capital and the Labor Income Share," Sustainability, MDPI, vol. 10(11), pages 1-17, October.
    3. International Monetary Fund, 2008. "Macroeconomic Effects of EU Transfers in New Member States," IMF Working Papers 2008/223, International Monetary Fund.
    4. Silvia Bertarelli, 2006. "Public capital and growth," Politica economica, Società editrice il Mulino, issue 3, pages 361-398.
    5. repec:bla:jcmkts:v:46:y:2008:i::p:933-968 is not listed on IDEAS
    6. Chiara Del Bo & Massimo Florio & Giancarlo Manzi, 2010. "Regional Infrastructure and Convergence: Growth Implications in a Spatial Framework," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(3), pages 475-493, September.
    7. Philipp Breidenbach & Timo Mitze & Christoph Schmidt, 2011. "Evaluating EU Regional Policy: Many Empirical Specifications, One (Unpleasant) Result," ERSA conference papers ersa11p1144, European Regional Science Association.
    8. Bajar, Sumedha. & Rajeev, Meenakshi., 2015. "The impact of infrastructure provisioning on inequality : evidence from India," ILO Working Papers 994882713402676, International Labour Organization.
    9. Getachew, Yoseph Y. & Turnovsky, Stephen J., 2015. "Productive government spending and its consequences for the growth–inequality tradeoff," Research in Economics, Elsevier, vol. 69(4), pages 621-640.
    10. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," Edinburgh School of Economics Discussion Paper Series 179, Edinburgh School of Economics, University of Edinburgh.
    11. Breidenbach, Philipp & Mitze, Timo & Schmidt, Christoph M., 2016. "EU structural funds and regional income convergence: A sobering experience," Ruhr Economic Papers 608, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    12. Catalina Cantu, 2017. "Mexico’s economic infrastructure: international benchmark and its impact on growth," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-26, December.
    13. Stephane Straub, 2011. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 683-708.
    14. Roland-Holst, David & Sugiyarto, Guntur, 2014. "Growth Horizons for a Changing Asian Regional Economy," ADB Economics Working Paper Series 392, Asian Development Bank.
    15. Schmidt, Christoph & Mitze, Timo & Breidenbach, Philipp, 2016. "EU Structural Funds and Regional Income Convergence – A Sobering Experience," CEPR Discussion Papers 11210, C.E.P.R. Discussion Papers.
    16. Pierfederico Asdrubali & Soyoung Kim, 2008. "The Economic Effects of the EU Budget: A VAR Analysis," Journal of Common Market Studies, Wiley Blackwell, vol. 46(5), pages 933-968, December.
    17. repec:ilo:ilowps:488271 is not listed on IDEAS
    18. Timilsina,Govinda R. & Hochman,Gal & Song,Ze, 2020. "Infrastructure, Economic Growth, and Poverty : A Review," Policy Research Working Paper Series 9258, The World Bank.
    19. World Bank, 2008. "Nicaragua - Poverty Assessment : Volume 2. Background Paper," World Bank Publications - Reports 8103, The World Bank Group.
    20. Kouassi YEBOUA, 2021. "Fiscal policy and growth-inequality tradeoffs: Bayesian evidence from Cote d’Ivoire," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(626), S), pages 297-310, Spring.
    21. Shankar, Raja & Shah, Anwar, 2009. "Lessons from European Union policies for regional development," Policy Research Working Paper Series 4977, The World Bank.
    22. Jean-Louis Combes & Alexandru Minea & Pegdéwendé Nestor Sawadogo, 2019. "Assessing the effects of combating illicit financial flows on domestic tax revenue mobilization in developing countries," CERDI Working papers halshs-02019073, HAL.

    More about this item

    Keywords

    cost-benefit analysis; EU Structural Funds; infrastructure; project evaluation; D61; H43; R58;
    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
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

    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:kap:ecopln:v:38:y:2005:i:3:p:179-210. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.