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Are project appraisers chiromancers?

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  • Marco Percoco

Abstract

The accuracy of ex ante project appraisal has been subject to scrutiny by scholars in recent years. It has often been claimed that the inaccuracy of project evaluation leads to a waste of public spending. In this article I acknowledge that the appraisal of a project consists in long-run predictions of several variables, so that the accuracy of ex ante evaluations should be assessed on the basis of forecasting rationality. I test for the rationality of a sample of World Bank project appraisals and find no significant discrepancy between ex ante and realized rates of return.

Suggested Citation

  • Marco Percoco, 2012. "Are project appraisers chiromancers?," Applied Economics Letters, Taylor & Francis Journals, vol. 19(3), pages 237-241, February.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:3:p:237-241
    DOI: 10.1080/13504851.2011.572837
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    References listed on IDEAS

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    1. Dollar, David & Levin, Victoria, 2005. "Sowing and reaping: institutional quality and project outcomes in developing countries," Policy Research Working Paper Series 3524, The World Bank.
    2. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2008. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 122-157, March.
    3. Zarnowitz, Victor, 1985. "Rational Expectations and Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 293-311, October.
    4. Pohl, Gerhard & Mihaljek, Dubravko, 1992. "Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects," The World Bank Economic Review, World Bank, vol. 6(2), pages 255-277, May.
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