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Beyond Rate of Return: Reorienting Project Appraisal

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  • Devarajan, Shantayanan
  • Squire, Lyn
  • Suthiwart-Narueput, Sethaput

Abstract

Traditional approaches to project appraisal fail in practice to address two fundamental questions: whether a project belongs in the public or the private sector; and what effect any external assistance associated with the project has on the country's development. The first issue is of general interest to both national policymakers and international donors. If the government provides a good or service that would otherwise have been provided by the private sector, the net contribution of the public project could be low. The second issue is of particular concern to donors. If financial resources are fungible, the project being appraised might well have been undertaken without external financing. In this case, donor funds are actually financing some other, unappraised project. Both cases argue for a shift in the emphasis of project evaluation away from a concern with precise rate-of-return calculations and toward broader sectoral analyses and public expenditure reviews. In this context, three areas critical for proper project appraisal include a consideration of the rationale for public intervention, the fiscal impact of the project, and the fungibility of external assistance.

Suggested Citation

  • Devarajan, Shantayanan & Squire, Lyn & Suthiwart-Narueput, Sethaput, 1997. "Beyond Rate of Return: Reorienting Project Appraisal," The World Bank Research Observer, World Bank, vol. 12(1), pages 35-46, February.
  • Handle: RePEc:oup:wbrobs:v:12:y:1997:i:1:p:35-46
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    References listed on IDEAS

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    2. James E. Anderson & Will Martin, 2011. "Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 289-309, April.
    3. Mark Schreiner, 2001. "Evaluation and Microenterprise Programs," Development and Comp Systems 0108002, University Library of Munich, Germany, revised 27 Dec 2001.
    4. Venetoklis, Takis, 2002. "Public Policy Evaluation: Introduction to Quantitative Methodologies," Research Reports 90, VATT Institute for Economic Research.
    5. Wiig, Arne & Kolstad, Ivar, 2005. "Lowering barriers to agricultural exports through technical assistance," Food Policy, Elsevier, vol. 30(2), pages 185-204, April.
    6. Mr. Andrew M. Warner, 2013. "A Framework for Efficient Government Investment," IMF Working Papers 2013/058, International Monetary Fund.
    7. José CARBAJO, 2006. "Assessing the contribution of investment projects to building a market economy: beyond cost-benefit analysis?," Departmental Working Papers 2006-39, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    8. Martin, Will & Anderson, James E., 2005. "Costs of taxation and the benefits of public goods : the role of income effects," Policy Research Working Paper Series 3700, The World Bank.
    9. Anderson, James E. & Martin, Will, 1998. "Evaluating public expenditures when governments must rely on distortionary taxation," Policy Research Working Paper Series 1981, The World Bank.
    10. Lant Pritchett & Salimah Samji & Jeffrey S. Hammer, 2012. "It's All about MeE: Using Structured Experiential Learning ('e') to Crawl the Design Space," WIDER Working Paper Series wp-2012-104, World Institute for Development Economic Research (UNU-WIDER).
    11. Mark Schreiner, 2001. "Microenterprise in the First and Third Worlds," Development and Comp Systems 0108001, University Library of Munich, Germany, revised 27 Dec 2001.
    12. Suthiwart-Narueput, Sethaput, 1998. "The economic analysis of sector investment programs," Policy Research Working Paper Series 1973, The World Bank.
    13. Martin Ravallion, 2016. "The World Bank: Why It Is Still Needed and Why It Still Disappoints," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 77-94, Winter.
    14. Garza Escalante, Enrique F. & Paniagua Fernandez, L. Fernando, 2016. "Preparing transitions in public services: Payoff dimension, value estimation, schedule and budget computation," Socio-Economic Planning Sciences, Elsevier, vol. 55(C), pages 36-46.
    15. Devarajan, Shantayanan & Rajkumar, Andrew Sunil & Swaroop, Vinaya, 1999. "What does aid to Africa finance?," Policy Research Working Paper Series 2092, The World Bank.
    16. Lyn Squire, 1998. "Professor Mirrlees' Contribution to Economic Policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(1), pages 83-91, February.
    17. Chiara DEL BO & Massimo FLORIO, 2008. "Infrastructure and growth in the European Union: an empirical analysis at the regional level in a spatial framework," Departmental Working Papers 2008-37, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    18. Mark Schreiner & Jacob Yaron, 2001. "Development Finance Institutions : Measuring Their Subsidy," World Bank Publications - Books, The World Bank Group, number 13983.
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    21. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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