| Foreword | p. xi |
| Acknowledgments | p. xiii |
| Glossary | p. xv |
| Introduction | p. xxv |
| An Overview of Economic Analysis | p. 1 |
| The Economic Setting | p. 2 |
| Rationale for Public Sector Involvement | p. 2 |
| Questions That Economic Analysis Should Answer | p. 3 |
| Conceptual Framework | p. 9 |
| Economic Opportunity Costs | p. 10 |
| Risk Analysis | p. 12 |
| The Process of Economic Analysis | p. 14 |
| Transparency | p. 16 |
| Consideration of Alternatives | p. 17 |
| With and Without Comparisons | p. 17 |
| Private Sector Counterfactual | p. 19 |
| Separable Components | p. 21 |
| Getting the Flows Right: Identifying Costs and Benefits | p. 25 |
| Cash Flow Analysis | p. 27 |
| Sunk Costs | p. 27 |
| Interest Payments and Repayment of Principal | p. 28 |
| Interest during Construction | p. 28 |
| Physical Contingencies | p. 29 |
| Transfer Payments | p. 29 |
| Donations and Contributions in Kind | p. 30 |
| The China Agricultural Support Services Project: An Example | p. 30 |
| Externalities | p. 32 |
| Consumer Surplus | p. 33 |
| Getting Prices Right | p. 37 |
| Numeraire and Price Level | p. 37 |
| Economic Analysis and Inflation | p. 41 |
| Financial Analysis and Inflation: A Digression | p. 42 |
| Market Prices versus Economic Costs | p. 44 |
| Valuation of Inputs and Outputs | p. 44 |
| Tradable and Nontradable Goods | p. 45 |
| Valuation of Tradable Goods | p. 46 |
| Shadow Exchange Rate | p. 49 |
| Premium on Foreign Exchange | p. 50 |
| Other Sources of Premiums | p. 52 |
| Valuation of Nontradable Goods and Services | p. 53 |
| Conversion Factors | p. 56 |
| Marginal Cost of Public Funds | p. 57 |
| Valuing Environmental Externalities | p. 59 |
| Environmental Externalities | p. 61 |
| Project Boundaries and Time Horizon | p. 61 |
| Valuation of Environmental Impacts | p. 62 |
| Preventing and Mitigating Environmental Impacts | p. 70 |
| Cost-Effectiveness | p. 73 |
| Relating Costs to Benefits: Cost-Effectiveness Analysis | p. 74 |
| Assessing Unit Costs | p. 77 |
| Relating Costs to Benefits: Weighted Cost-Effectiveness | p. 78 |
| Comparing Options with Subjective Outcomes | p. 80 |
| Some Important Caveats | p. 81 |
| Economic Evaluation of Education Projects | p. 83 |
| Categories of Project Costs | p. 83 |
| Organizing and Presenting the Cost Data | p. 85 |
| Relating Costs to Benefits: Cost-Benefit Analysis | p. 86 |
| Computing Rates of Return to Education by Level | p. 94 |
| Economic Evaluation of Health Projects | p. 99 |
| The Steps of Economic Analysis | p. 99 |
| An Immunization Example: A Child Immunization Program | p. 101 |
| Value of Life | p. 117 |
| Examples of Measures of Performance | p. 118 |
| Examples of Potential Benefits from Health Projects | p. 119 |
| Economic Evaluation of Transport Projects | p. 121 |
| Conceptual Framework | p. 122 |
| Forecasting Demand | p. 124 |
| Normal, Generated, and Diverted Traffic | p. 124 |
| Reduction of Vehicle Operating Costs | p. 126 |
| Time Savings | p. 126 |
| Accident Reduction | p. 131 |
| Producer Surplus or Net National Income Approach | p. 132 |
| Network Effects within a Mode | p. 137 |
| Intermodal Effects | p. 137 |
| Timing | p. 138 |
| Environmental Impact | p. 140 |
| The Highway Development Model | p. 140 |
| Gainers and Losers | p. 141 |
| Fiscal Impact | p. 141 |
| Risk and Sensitivity Analysis | p. 143 |
| Sensitivity Analysis | p. 143 |
| Switching Values | p. 145 |
| Selection of Variables and Depth of Analysis | p. 146 |
| Presentation of Sensitivity Analysis | p. 147 |
| Shortcomings of Sensitivity Analysis | p. 148 |
| The Expected Net Present Value Criterion | p. 149 |
| NPV versus Best Estimates | p. 149 |
| Products of Variables and Interactions among Project Components | p. 151 |
| Monte Carlo Simulation and Risk Analysis | p. 151 |
| Assigning Probability Distributions of Project Components | p. 152 |
| Assigning Correlations among Project Components | p. 155 |
| A Hypothetical Example: Advantages of Estimating Expected NPV and Assessing Risk | p. 156 |
| Risk Neutrality and Government Decisionmaking | p. 160 |
| When the NPV Criterion Is Inadequate | p. 164 |
| Gainers and Losers | p. 167 |
| Dani's Clinic | p. 168 |
| Republic of Mauritius: Higher and Technical Education Project | p. 171 |
| Conclusions | p. 187 |
| Estimation of the Shadow Exchange Rate | p. 189 |
| Key Assumptions | p. 192 |
| Employment Rates | p. 192 |
| Incremental Income for University Graduates | p. 193 |
| Incremental Income for PhDs | p. 193 |
| Incremental Income for MBAs | p. 193 |
| Rationale for Public Provision | p. 199 |
| Natural Monopolies | p. 201 |
| Externalities | p. 202 |
| Public Goods | p. 203 |
| Asymmetric Information and Incomplete Markets | p. 205 |
| Poverty Reduction | p. 209 |
| Merit Goods | p. 209 |
| Distribution of Costs and Benefits | p. 210 |
| Summary | p. 212 |
| Technical Appendix | p. 215 |
| Discounting and Compounding Techniques | p. 215 |
| The Mechanics of Discounting and Compounding | p. 216 |
| Net Present Value Criterion | p. 217 |
| Internal Rate of Return | p. 217 |
| Comparison of Mutually Exclusive Alternatives | p. 219 |
| Conceptual Framework | p. 222 |
| Traded Goods | p. 227 |
| Nontraded, but Tradable Goods | p. 229 |
| Nontradable Goods | p. 230 |
| The Shadow Exchange Rate | p. 231 |
| Quantitative Restrictions | p. 235 |
| The Opportunity Cost of Capital | p. 238 |
| The Shadow Wage Rate | p. 244 |
| References and Bibliography | p. 247 |
| Index | p. 259 |
| Boxes | |
| Mauritius Higher and Technical Education Project | p. 13 |
| The With and Without Case: Vietnam Highway Rehabilitation Project | p. 19 |
| Assessing Disposal Alternatives for Geothermal Wastewater in the Philippines | p. 65 |
| Estimating the Downstream Costs of Soil Erosion in China | p. 66 |
| Using Dose-Response Relationships to Estimate Health Outcomes in Jakarta | p. 67 |
| Valuing Life by Statistical Techniques | p. 68 |
| Valuing Consumer Surplus of International Tourists in Madagascar | p. 69 |
| Evaluating the Cost-Effectiveness of School Inputs in the Philippines | p. 76 |
| Evaluating School Amalgamation Options in Barbados | p. 88 |
| Cost-Benefit Analysis of School Improvement Options in Brazil | p. 89 |
| Measuring Healthy Years of Life Gained | p. 109 |
| Estimating the Value of Time in Brazil | p. 129 |
| Mexico-Probabilistic Risk Analysis | p. 161 |
| Shadow Price of Foreign Exchange in India | p. 236 |
| Opportunity Cost of Capital in Indonesia, 1992 | p. 243 |
| Figures | |
| With and Without Project Comparison | p. 18 |
| Displacement and Addition Effects | p. 21 |
| Measuring Consumer Surplus | p. 34 |
| Net Benefits Profile of a Project | p. 35 |
| Private versus Social Costs | p. 60 |
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