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Dynamic cost-benefit analysis of large projects: The role of capital and investment costs

Author

Listed:
  • Li, Chuan-Zhong

    (Uppsala University, Box 513)

  • Löfgren, Karl-Gustaf

    (Department of Economics, Umeå University)

Abstract

Based on an ideal index for de.ating after-project prices, we derive a dynamic cost-bene.t rule for evaluating large projects. We show that, in addition to the conventional income and consumer surplus meaures, the rule also entails an extra term involving capital and investment cost changes.

Suggested Citation

  • Li, Chuan-Zhong & Löfgren, Karl-Gustaf, 2008. "Dynamic cost-benefit analysis of large projects: The role of capital and investment costs," Umeå Economic Studies 727, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0727
    as

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    References listed on IDEAS

    as
    1. Avinash Dixit & Peter Hammond & Michael Hoel, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(3), pages 551-556.
    2. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989, Elsevier.
    3. Martin L. Weitzman, 2001. "A Contribution to the Theory of Welfare Accounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 1-23, March.
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    More about this item

    Keywords

    cost-benefit rules; large projects; capital costs;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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